patrick.net

It is going to be a very interesting year to sit and watch housing from the comforts of my rental apartment.... Buying will hopefully make good financial sense next summer... Or if not then, the summer of 2012.

Excellent comments.

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.

Yes! let prices fall. And no its not going to hurt many homeowners, because many didnt buy during the bubble. So the miserable group isnt as big as the NYT makes it to be.

From the article:

"The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent."

Wow. They still just don't get it. Home values dropped because housing was extremely overvalued. I'm sure some 17th century Dutch people who paid hundreds of thousands of dollars for a tulip bulb were pretty miserable too - was the solution to keep the price that high? I'm sorry they're miserable, but is it fair to make everyone ELSE miserable too?

This is not a Catch-22. A Catch-22 is a situation where the means of achieving ones objective paradoxically is also the reason that PREVENTS one from achieving ones objective. This is simply a case of attempting to better the situation of ONE group (homeowners who bought during the bubble) at the expense of ANOTHER group (renters).

Market forces will win out in the end, and with out the insane propping up of CRAZY lending, I feel that prices will slowly if not quickly in some areas, continue to come down. In fact they should meet and might pass up the trend-line without bubble and in fact maybe a dip as too many homes were built in areas that are going to have less and less support from jobs.

When fuel gets expensive, the suburbs are going to have another pricing pressure on them (lower) so in the years to come, when the rest of the world starts to push our natural resources up and up in price and a GALLON a GAS sells for $5.00 a gallon, what do you think will happen to housing prices of homes 50 miles away from work centers?

Of course they have to go down, as that was their advantage at time when Fuel was CHEAP, Have you googled http://en.wikipedia.org/wiki/Suburb Interesting, so many homes that are too far from the work centers, and as fuel among other commodities goes higher I would think that those houses have to come lower, added to by then higher interest rates, I am a RENTER forever and in fact the longer I live, the more I realize the less I REALLY NEED, and in fact WANT the freedom of owning a bank account and health insurance is oh so much better of a feeling to me then any of the homes I have owned.

Wow! Yahoo dropped from $350 per share to under $20 per share. So where was the Govt on that one? Stimulas package for bubble stock anyone ?

Chuckie13 says

Market forces will win out in the end, and with out the insane propping up of CRAZY lending, I feel that prices will slowly if not quickly in some areas, continue to come down. In fact they should meet and might pass up the trend-line without bubble and in fact maybe a dip as too many homes were built in areas that are going to have less and less support from jobs

Exactly. Because of high home prices in the BA you have jobs moved out. And if history is any indicator jobs dont move back as easy. Its a lose-lose situation. You currently have both renters and homeowners who have a job being put into risk by dumb buyers and their inflated prices.

I don't see this as a catch-22 at all.

Prices have to come down at least another 20% and probably even more.

The value of homes has to reflect what they are really worth not some made up "appreciated" value. The value of a home is what buyers are willing to pay for it, not some historical number or some appraised value by some appraiser.

In order for homes to move prices have to match what buyers are willing to pay, it's that simple. The government may delay the inevitable drop for a period of time but they will drop sooner or later. If I was a seller right now I would slash my price and move the property quicker and pass it off to a knife catcher, because once the government has no option but to accept the houses are vastly overvalued prices will PLUMMET. Sellers will be wishing they had cut the price 10% and sold their property at today's prices.

gameisrigged says

This is not a Catch-22. A Catch-22 is a situation where the means of achieving ones objective paradoxically is also the reason that PREVENTS one from achieving ones objective.

But there IS a Catch-22, and it is very , very large. At least if one uses the more common definition of a Catch-22, namely a double-bind or a no-win-situation.

I think there is a great deal of misunderstanding on the topic of why our beloved government is trying to keep housing prices UP. The main reason is that our banks are INSOLVENT with a negative balance on the order of 4T dollars. The whole point of "extend-and-pretend" is to avoid REALIZING the losses, in a technical accounting sense (which is another topic).

Do people not understand that is THEIR money that the banks have lost? It is your deposit money that the banks have squandered on bad loans. If they realized all their losses today, the taxpayer and their government would have to pony up 4T dollars to cover the losses and pay themselves back their deposits. If they don't there will be a run on the banks and a run on the US Dollar (A.K.A inflation), the likes of which we have never seen before even in the great depression of the 1930s.

So, yes, we are all caught in this grand Catch-22. It is abhorrent and distasteful that our Government is trying to re-inflate house prices, but I understand completely why they are doing it. There is no point in sticking our head in the sand.

What we can discuss is what is better ways to assign the losses to the people who deserve them: Homedebtors, bank management, bank shareholders, certain bank bondholders and so on. This is where the powers that were, primarily George Bush, Hank Paulson and Tim Geithner in November 2008 with TARP, have done a lousy job and gave the banks way too much of a sweetheart deal. All bank shares should be valued at 0 before we, the taxpayers, re-capitalized the banks. This was the biggest corruption that took place.

To get back to the Catch-22: Either the government spends your money on propping up house prices, or they spend your money on paying yourself your lost bank deposits back. There are no good choices, only less corrupt and more fair ways of going about whichever choice is made.

"I think there is a great deal of misunderstanding on the topic of why our beloved government is trying to keep housing prices UP. The main reason is that our banks are INSOLVENT with a negative balance on the order of 4T dollars. "

DING DING DING, we have a winner. If the govt. sat back and let prices truly crash, the banks would basically all fail. In a worst case scenario, you would have bank runs, empty ATMs, and possibly a 2nd Depression.

Those who support letting house prices follow the free market and fall do not know the consequences of such a scheme.

^^ Thank you justme. The government could care less whether you lost money. They are worried about keeping the economy from cratering worse than it already has...

HousingWatcher says

“I think there is a great deal of misunderstanding on the topic of why our beloved government is trying to keep housing prices UP. The main reason is that our banks are INSOLVENT with a negative balance on the order of 4T dollars. ”
DING DING DING, we have a winner. If the govt. sat back and let prices truly crash, the banks would basically all fail. In a worst case scenario, you would have bank runs, empty ATMs, and possibly a 2nd Depression.
Those who support letting house prices follow the free market and fall do not know the consequences of such a scheme.

No, they wouldn't all fail. Some banks never participated in the ponzi scheme. Some of the ones that did participate already DID fail - Countrywide, WaMu, a lot of smaller ones too. Did society end when that happened? No. See, here's your problem - you assume a false dichotomy, that we either turn on the money hose and blast trillions of dollars towards Wall Street with no strings attached, or we do absolutely nothing and allow a run on every bank. Explain to me how taking each failed bank into receivership could possibly cost more money than the trillions already spent. That makes no sense. This philosophy is held in place by fear alone - some vague handwaving about how we would have another Great Depression, but never any detailed explanation as to why the way we're doing it is the only possible solution.

Funny thing - there was a Washington Mutual bank right down the street from me, and I never once saw a run on it or any signs saying the ATM had been emptied out.

gameisrigged says

No. See, here’s your problem - you assume a false dichotomy, that we either turn on the money hose and blast trillions of dollars towards Wall Street with no strings attached, or we do absolutely nothing and allow a run on every bank. Explain to me how taking each failed bank into receivership could possibly cost more money than the trillions already spent. That makes no sense. This philosophy is held in place by fear alone - some vague handwaving about how we would have another Great Depression, but never any detailed explanation as to why the way we’re doing it is the only possible solution.

I don't think others are treating as a false dichotomy. I'm sure there are many, many other possible solutions to the problem--some of which probably yield a better result. Unfortunately, you don't know the future results when you have to make your decision.

And you were probably being facetious, but there are most certainly strings attached to the money Wall St. and the banks received. Much of it was in the form of loans that were paid back. Some were preferred shares that gave the Feds ownership.

Troy can probably speak to your question about cost better than I--but I think you are underestimating the magnitude of the crisis. When it happened, I remember Warren Buffet talking about a trade he took--someone actually loaned him money at a negative rate. That's how much fear there was...

One more critical point: the banks ARE the government at this point. Though lobbyists and through well placed "former" employees of various large banks, the voting of the public has become mostly irrelevant. It doesn't matter which congressmen you elect, with precious few exceptions, like Marcy Kaptur, Ron Paul, and Bernie Sanders. Almost all the others will either take the banks' lobbying money, or bow to internal officials who are actually representatives of the banks, like Paulson was still actually working for Goldman when he was nominally Treasury Secretary.

This link points it out in a funny way:

http://www.borowitzreport.com/2009/07/16/goldman-sachs-in-talks-to/

This one is serious:

http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

HousingWatcher says

“I think there is a great deal of misunderstanding on the topic of why our beloved government is trying to keep housing prices UP. The main reason is that our banks are INSOLVENT with a negative balance on the order of 4T dollars. ”
DING DING DING, we have a winner. If the govt. sat back and let prices truly crash, the banks would basically all fail. In a worst case scenario, you would have bank runs, empty ATMs, and possibly a 2nd Depression.
Those who support letting house prices follow the free market and fall do not know the consequences of such a scheme.

So you think keeping bad business decisions from failing is a good idea? Huh? That's sheer scare mongering. World will never end. I think it is a good idea to have bad banks being taken over by good businesses.

bubblesitter says

So you think keeping bad business decisions from failing is a good idea? Huh?

No I don't , but I think you have underestimated the gravity of the situation that will manifest itself if every American show up at the bank teller and are told that the money they deposited is GONE and they cannot have it back.

gameisrigged says

No, they wouldn’t all fail. Some banks never participated in the ponzi scheme. Some of the ones that did participate already DID fail - Countrywide, WaMu, a lot of smaller ones too. Did society end when that happened?

I think you are concentrating too much on whether there might or might not be a few banks standing afterwards if we let the dominoes fall.

That is not the point. The point is what would happen when 4T dollars of depositor's money is lost.

justme says

gameisrigged says

No, they wouldn’t all fail. Some banks never participated in the ponzi scheme. Some of the ones that did participate already DID fail - Countrywide, WaMu, a lot of smaller ones too. Did society end when that happened?

I think you are concentrating too much on whether there might or might not be a few banks standing afterwards if we let the dominoes fall.
That is not the point. The point is what would happen when 4T dollars of depositor’s money is lost.

If your only issue is what happens to the depositors' money (which you are exaggerating), then the government should have just paid them back directly, if needed. I'd rather see that than what we got, which was trillions of dollars being funneled to Wall Street fatcats. At least then, the taxpayers would actually have come away with something.

But that wouldn't even be necessary, because you are again creating a false dilemna. There were much better solutions to the problem than what the government did. You refuse to acknowledge that there are any possibilities other than give Wall Street fatcats whatever they want. I disagree.

As for "4 trillion", that would never happen. First of all, not every single bank would fail. Second, there is FDIC insurance, which has reserves to cover lost depositor money. And as Patrick pointed out, the banks ARE the government. But rather than the banks running the government, a better solution would have been to have the government run the banks. If a bank becomes insolvent, then the government should have taken it into receivership, not just give them money to do whatever they want with.

tatupu70 says

I don’t think others are treating as a false dichotomy. I’m sure there are many, many other possible solutions to the problem–some of which probably yield a better result. Unfortunately, you don’t know the future results when you have to make your decision.

Sorry, that doesn't make any sense. You seem to be agreeing with me that the government made the wrong decision, yet you start off the paragraph by stating that you disagree with me. ???

And you were probably being facetious, but there are most certainly strings attached to the money Wall St. and the banks received. Much of it was in the form of loans that were paid back. Some were preferred shares that gave the Feds ownership.

I think you are quite naive about what's really going on. The banks are getting "loans" for essentially no cost. They are taking that free money, investing it, and making a profit, so yes, they are essentially being given free taxpayer money. And no, there are not any strings attached to it. The government quickly gave up on their plans to limit executive pay after Wall Street made the stock market crash as a "warning". And there never was any plan to force banks to actually loan out the money the government was giving them (which was supposedly the purpose of TARP). The banks are also not being required to write the true value of their assets to their books. If you don't believe me, look up how much profit the Wall Street major players are making, and then look up how fucked the middle class still is.

Troy can probably speak to your question about cost better than I–but I think you are underestimating the magnitude of the crisis. When it happened, I remember Warren Buffet talking about a trade he took–someone actually loaned him money at a negative rate. That’s how much fear there was…

Like I give a shit if Warren Buffet loses his ass.

You need to read those links Patrick posted. You have to understand who's really running things here. They are using fear to control you, and you are buying into it hook, line, and sinker.

The government could just print the money to cover the lost depositers money with the banks that go bust.

This is better than handing the trillions to the well connected and those that made the bad decisions.

gameisrigged says

As for “4 trillion”, that would never happen. First of all, not every single bank would fail. Second, there is FDIC insurance, which has reserves to cover lost depositor money.

I think you are being dangerously naive. How do you know that 4T would never happen?

Back in Feb 2009, Roubini estimated that the losses in asset market value was 3.6T, and the 4T number is what I have seen later.

http://www.bnet.com/blog/financial-services/financial-roundup-total-bank-losses-to-36-trillion-mortgage-lender-breaks-half-of-cdos-in-default/403

If you are just going to pretend that these losses do not exist then of course you can make any claim.

And the FDIC? They have funds on hand to cover maybe 2-3% of the 4T. Where is the rest going to come from?

The government could just print the money to cover the lost depositers money with the banks that go bust.

Exactly. I don't get what all the fuss is about. Just move some decimals around.

StillLooking says

The government could just print the money to cover the lost depositers money with the banks that go bust.

Hello? Two things wrong here.

(1) You realize that the US Government does not actually "print" money, what it does is create government debt (bonds) and then the Federal Reserve agrees to BUY these bonds in exchange for "money" . This would be the mother of all bailouts, would it not?

And once you got your "refund", what else would you do than put it bank in a bank somewhere? Isn't that exactly the moral hazard you wish to avoid?

(2) If the Fed permanently created 4T in new currency, what would the rest of the world say? Isn't this what the Weimar Republic did in the 1920s, with ensuing hyperinflation and a collapsing foreign exchange rate as a result?

Please understand that this is not a real solution.

Austinhousingbubble says

Exactly. I don’t get what all the fuss is about. Just move some decimals around.

The fuss is about WHO is going to PAY for the losses. Why do people not understand that? If we "print" 4T in new currency then WE ALL pay for the losses, not the banks.

justme says

Austinhousingbubble says
Exactly. I don’t get what all the fuss is about. Just move some decimals around.

The fuss is about WHO is going to PAY for the losses. Why do people not understand that? If we “print” 4T in new currency then WE ALL pay for the losses, not the banks.

Actually it makes certain that people that save money in government insured accounts don't lose. Any other scheme cheats the savers.

Why do you want to cheat those that save their money in the banks out of their money or the value of their money?

The fuss is about WHO is going to PAY for the losses. Why do people not understand that? If we “print” 4T in new currency then WE ALL pay for the losses, not the banks.

I assumed my flippancy was obvious...when we get into the trillions, it just gets zany. Almost nobody really comprehends the enormity of the numbers being tossed around. I know I can't. You can't even count to a trillion given a lifetime to do it--not even two or three lifetimes.

Going back to your initial thoughts on the matter -- It's unclear to me how it would've proven any more injurious to the taxpayer if the Fed hadn't manipulated the residential real estate market, and instead, forced the banks to realize their losses on their balance sheets. What is and remains very clear is that we need relative price discovery in housing. Under current housing policy, it's the mega banks and the speculators that are being buffered from the losses realized by the housing correction. Every whiz-bang policy measure or emergency relief program thus devised has been a bailout, back-door bailout or stopgap for the banks, exposing generations of taxpayers to vastly disproportionate amounts of liability and hardship, the final numbers of which I'm not sure anyone can accurately quantify yet. Citing this as the lesser or more palatable of two nightmare scenarios because of where the decimal point might land or the rate at which middle class wealth contraction occurs...is somewhat amusing to me.

As for the complete systemic breakdown scenario where all the commercial banks in America fold and the depositors are compensated by an insolvent FDIC with devalued dollars printed from their future taxable income, (a non-issue where most I-banks are concerned anyway), we could always take a look at some bold revanchist measures such as bonus clawbacks or aggressive revisions to the tax code in order to better focus the fallout into the laps of the bunch who helped create it. Just a thought... a dream actually.

BTW if you're still depositing your money into a major commercial bank, you should probably be horsewhipped...as in whipped with a horse.

gameisrigged says

Sorry, that doesn’t make any sense. You seem to be agreeing with me that the government made the wrong decision, yet you start off the paragraph by stating that you disagree with me. ???

You completely missed my point. I'm saying the decision was reasonable given the information they had at the time. It may or may not have been the best one. I don't know and neither do you.

gameisrigged says

They are taking that free money, investing it, and making a profit, so yes, they are essentially being given free taxpayer money. And no, there are not any strings attached to it

That's a little different. They aren't being GIVEN anything. They are getting LOANS. And obviously loans do have strings attached. Ex. You must repay this money.

gameisrigged says

Like I give a shit if Warren Buffet loses his ass.

Again you completely missed the point. Buffet made out like a bandit, but that's completely irrelevant. The point was that someone actually wanted to buy an investment that paid him less in the future. He gave Buffet $x in return for $x-1 in the future. That shows how effed up things were at that point.

None of this has anything to do with keeping middle class people in their houses. Don't be fooled. People with an income that can afford even a $1,000.00 mortgage payment will be able to keep a roof over their head no matter what happens. This is about keeping people in their mortgages, which ultimately keeps rich people rich by attempting to prevent very expensive breaches of contract by people who are not as rich. Keeping home prices inflated is about convincing middle America to continue to service interest which they pay to Uncle Sam and big banks in lieu of taxes.

In the long view, the rich pay 80% of income taxes, but only have about half of the wealth. When you count estate and other taxes, I would anticipate the share paid by the rich is even uglier. Ultimately, then, there would seem to be a significant down-side risk of middle class default since, by and large, almost all of the new home debt is guaranteed by the government, with an implicit guaranty on virtually all of the rest. This matters a great deal to wealthy people.

The pertinent question is who loses when the government must cover another $4 trillion if values collapse to their "undoctored" levels? Who pays all the taxes? Who holds all of the notes on those houses? As noted above, not the middle class. Rich people and the government made a big bet that they could slurp trillions out of the middle class in interest payments by artificially increasing housing prices. If that falls apart, they lose. If the government incurs another $4 trillion expense because of mortgage defaults, it cannot print to cover it. The international community will not tolerate another major dent on the US balance sheet. Ultimately, the balance sheet would have to be covered with taxes, which the rich would pay, because they have the highest percentage of liquid cash.

The alternative to the rich and the government losing out both on the mortgages and on the taxes the rich people pay is sucking that money out of the middle class that live in the houses. Justme is dead on. Inflation is the tool to achieve that. The government loses out on some the interest revenue to inflation, but at least the revenue loss is only 2-3% over time, instead of a colossal loss up front. Thus the push to keep a massive wave of strategic prime defaults in check by duping the middle class people into believing their houses are "stores of value" instead of giant, sucking liabilities. The longer that illusion is maintained, the longer the inflated payment stream keeps coming in the door, which is, in theory if not in practice, an incredibly stealthy tax on all of those stupid enough to fall for it.

That, at least, is my theory. I may be wrong, but I seldom am.

Plawatty says

In the long view, the rich pay 80% of income taxes, but only have about half of the wealth

That is patently false

It's not false, unless I checked a faulty source. The top 20% pay about 80% of the income tax bill. The top 20% also have about 50% of the nation's overall wealth. Unless the national debt can be inflated away, that's a very bad situation for the wealthy when you look at just how much money is tied up in housing, and how much of it the government has guaranteed.

The wealthy are screwed unless the other 80% with only 50% of the money keep paying on their mortgages. Since the government has almost all of the risk, the US is basically at risk of becoming a banana republic unless it fleeces the wealthy through taxes to drive down government debt levels. There just isn't enough spending to cut, unless you gut the military.

tatupu70 says

Plawatty says

In the long view, the rich pay 80% of income taxes, but only have about half of the wealth

That is patently false

Plawatty says

It’s not false, unless I checked a faulty source.

Check your source. According to most reliable sources the top 10% have about 70% of the wealth. This is from Ron Paul's website.

Top 1% own 38.1%
Top 96-99% own 21.3%
Top 90-95% own 11.5%
And it gets much uglier as you proceed downward. Bottom 40% of population has 0.2% of all wealth.

That, at least, is my theory. I may be wrong, but I seldom am.

(groan)

bob2356 says

And it gets much uglier as you proceed downward. Bottom 40% of population has 0.2% of all wealth.

Not sure how the bottom could possibly have any wealth at all. All many people have is debt, or at least much more debt than the assets they own. Their net worth is negative.

Over half of all wealth is debt based financial wealth (savings, CD's, money market, bonds). By definition, there is an equal amount of debt corresponding to this financial wealth.

tatupu70 says

Plawatty says
In the long view, the rich pay 80% of income taxes, but only have about half of the wealth
That is patently false

If you include payroll taxes the middle class pays more in taxes than the wealthy.

A day on demand with Netflic's and I recommend these 3 movies listed below. (if you have not already done so)
The numbers I learned in the Movies (Documentaries) These numbers will BLOW YOU AWAY and for those of us that are bearish, we are in for many years of crummy economy and we know it.

Those of you bullish will either deny the numbers put forth in the movies, or turn bearish and we will all going to be living and dying in the next many years. For many of us baby boomers (thats how long this Depression will last)

These titles will all play right here on your computer (even over 811.b/g/n)

See all
1) Capitalism: A Love Story (yes it is a Michael Moore, but give it a chance)
2) Plunder: The Crime of Our Time
3) MAXED OUT was another one that proves to be sage as it was 2006 when it was made.

Check them out, wow... Did they screw us, or what .... ANY of you READ the Citibank Memo? Plutonomy? Oh man, I knew this country was not the country my dad fought for in WWII not anymore it is not.

Chuckie13 says

Check them out, wow… Did they screw us, or what …. ANY of you READ the Citibank Memo?

We havent even scratched the surface when it comes to Realtors slimy practices.

Plawatty says

which ultimately keeps rich people rich by attempting to prevent very expensive breaches of contract by people who are not as rich

Yes, I've been trying to make this point for a long time. People think they owe money to a bank or a banker. The bank is just the intermediary. They actually owe some **PERSON** money, and it's just made anonymous by the banking system. As is easily researched, mostly it's owed to the wealthy.

robertoaribas says

who cares if all the existing banks had failed? with the amount of taxpayer money, and 0% loans thrown at them, we could have formed all the new government banks we needed. in fact, this would have been MUCH cheaper, as:

1. assets from failed banks could be picked up cheaply

2. bonds of failed banks wiped out.

Many would argue TOO cheaply because of "firesale" prices, causing bondholders and even depositors to loose far more than they should have, and causing massive amounts of wealth to flow to to the well connected bankers who were able to take advantage of the firesale, at the expense of the public. Once again.

MarkInSF says

Plawatty says

which ultimately keeps rich people rich by attempting to prevent very expensive breaches of contract by people who are not as rich

Yes, I’ve been trying to make this point for a long time. People think they owe money to a bank or a banker. The bank is just the intermediary. They actually owe some **PERSON** money, and it’s just made anonymous by the banking system. As is easily researched, mostly it’s owed to the wealthy.

No they don't owe some person the money the banks did this using 15-30 times ( if hedgedund) leverage this is not one to one are u nuts have you done the math? Wow

It's very interesting to see the denial of some , when an event or an action has the potential to shatter a persons faith in core beliefs, they simply dismiss the event and refuse to admit something they have believed their whole life is nothing more than a scam.

This is the case with real estate. Upton Sinclair spoke about the trappings of real estate in his 1906 book The Jungle. It amazes me that more than 100 years later the scam keeps on going.

In the book Sinclair talked about how houses were "sold" to low income families so they could "own" their own homes in the meat packing districts. The loans on the houses had very high interest rates, and the construction of the homes were sub par but the marketing was very persuasive. When an "owner" of a home failed to pay his payment he was kicked out of the house and the house was repainted and some cosmetic changes were made(flippers) and the home would be sold again to the next dumb family.

This was in a 1906 book, the more things change the more they stay the same.

tatupu70 says

Plawatty says

In the long view, the rich pay 80% of income taxes, but only have about half of the wealth

That is patently false

Plawatty says

It’s not false, unless I checked a faulty source. The top 20% pay about 80% of the income tax bill. The top 20% also have about 50% of the nation’s overall wealth. Unless the national debt can be inflated away, that’s a very bad situation for the wealthy when you look at just how much money is tied up in housing, and how much of it the government has guaranteed.
The wealthy are screwed unless the other 80% with only 50% of the money keep paying on their mortgages. Since the government has almost all of the risk, the US is basically at risk of becoming a banana republic unless it fleeces the wealthy through taxes to drive down government debt levels. There just isn’t enough spending to cut, unless you gut the military.
tatupu70 says

Plawatty says

In the long view, the rich pay 80% of income taxes, but only have about half of the wealth

That is patently false

Again Search CITI MEMO in google, and HANG ON TO YOUR HAT... Use this search term. Citi memo plutonomy Ok, let me know what you think... I hope some (all of you) do it.

justme says

Austinhousingbubble says

Exactly. I don’t get what all the fuss is about. Just move some decimals around.

The fuss is about WHO is going to PAY for the losses. Why do people not understand that? If we “print” 4T in new currency then WE ALL pay for the losses, not the banks.

4 Trillion Might be (is likely only a fraction of losses) have you seen the PBS video with the Bloomberg reporter talking about the SUIT against the FED to disclose WHO THEY LOANED 15.7 TRILLION while having us worrying and talking about TARP what a Joke, this is the end of our good life we will be OK, just not ever (many years before) we are back to anything we have come to know.