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If You Want To Crash A Real Estate Market, Feeding Debt Is Exactly The Way To Make It Happen

A weekend topic starting with NPR. “This week’s Democratic presidential debate touched on a topic that usually doesn’t get much attention in these forums. ELIZABETH WARREN: Our housing problem in America is a problem on the supply side. And that means that the federal government stopped building new housing a long time ago, affordable housing.”

“Nobel laureate economist Robert Shiller joins us. SHILLER: For buyers, we’ve seen a home price boom since 2012, which has pushed home prices up quite a bit. For renters, rents have gone up kind of steadily and smoothly, not as much as home prices. But the wages haven’t kept up that they earn to pay the rent. So in either case, there is some suggestion of a problem.”

“SHILLER: One thing that I’ve been working on over the years is redesigning mortgages to help prevent the disaster of foreclosure and mortgages that have a automatic workout attached to them if home prices fall.”

From Bloomberg Opinion. “Democratic presidential candidate Elizabeth Warren attacked Wall Street firms on Monday for buying houses in the wake of the financial crisis, arguing that it contributed to the country’s growing inequality. I’m sympathetic to Warren’s criticism, and yet two things are true when it comes to the investor response to the housing bust.”

“It did represent a transfer of wealth from stressed homeowners to the wealthy, contributing to inequality, but it also stabilized the housing market and local economies at a time when there were no other buyers.”

“Homeownership, particularly for entry-level buyers, is intertwined with politics and community in a way not comparable to other forms of economic activity. Today it’s understandable why seeing aspiring homebuyers squeezed out of the market by all-cash institutional investors is problematic. But back in the dark days of the early 2010’s housing market, investors and cash buyers were just about the only game in town. Without them, America’s housing crash would have been much worse.”

Fromm Vice Magazine. “Tom Steyer, a billionaire from California, was asked during the fifth debate what he would do to address a rampant homelessness and housing affordability crisis in his home state. ‘What we’ve seen in California is that as a result of policy, we have millions too few housing units,’ Steyer said, potentially referring to the state’s infamous NIMBY-ism, which can make it tough for developers to enter new contracts.”

“Meanwhile, Massachusetts Sen. Elizabeth Warren, who represents a state with its own unique rental crisis, brought up racial inequity in U.S. housing policy and how that’s created a wider wealth gap. ‘Housing is how we build wealth in America,’ she said. ‘The federal government has subsidized the purchase of housing for decades for white people, and has said for black people, ‘You’re cut out of the deal.’ That was known as redlining.'”

From The Hill. “In Los Angeles, vacant housing could provide accommodations for the city’s entire homeless population of at least 36,000 people, with more than 5,000 units to spare. Many of those more than 41,000 vacant units are uninhabited because their owners bought them as long-term financial investments, and not because they needed a place to live, LAist reports.”

“Out of 10 high-end apartment buildings in downtown L.A., the researchers found an average vacancy rate of more than 70 percent in April 2019. A modestly sized one bedroom in one of these buildings can easily rent for more than $3,000 a month. ‘When developers put up exclusive luxury buildings that rent for more money a month than the residents currently living in a neighborhood make, they are making a speculative bet on what that neighborhood will look like in the future,’ the authors wrote.”

The Colorado Real Estate Journal. “Denver continues to be a premier destination for job seekers in this growth cycle, but net migration and total employment growth is decelerating from their peaks set earlier in the cycle. Rent growth is expected to plateau in Class A properties with concession offerings increasing, while Class B and Class C properties are projected to see stronger rent growth with the opportunities that value-add properties can offer. Value-add properties are Class C or older Class B properties that investors buy and renovate to bring the units up to date and subsequently raise rents to complement the improvements.”

“The uptick in new developments in areas such as Lower Downtown, River North, Five Points and Jefferson Park has brought thousands of Class A units to Denver and set a record for the most Class A new development completions in 2018. However, demand did not keep up and is expected to fall behind again this year. With such an overflow of new units in the market, Class A vacancy rates have started to rise, forcing Class A owners to provide larger concessions in order to attract new tenants, as well to retain their current tenants.”

“The abundance of value-add properties in the suburbs provides investors the opportunity to renovate and raise rents, which increases the net operating income. From 2011 to 2015, Class B asking rents averaged an increase of 7.5% annually, more than double the average annual rent growth of 3.4% recorded from 2016 to 2018. Class B asking rents are expected to increase 2.8% and 2.2% in 2019 and 2020, respectively.”

From Bay City News in California. “Housing affordability activists on Friday protested at bank branches in Oakland to call on the institutions to sell foreclosed properties to community land trusts at reduced prices and play a greater role in creating more affordable housing in California. The protesters chanted ‘Chase got bailed out we got sold out,’ and talked with customers in line. A security guard called police but the activists left before officers arrived.”

“One of the protesters on Friday was Dominique Walker, an Oakland native who was homeless but earlier this week moved into a vacant West Oakland house owned by real estate investment firm Wedgewood Inc. ‘Our goal is to reclaim the property owned by speculators into the hands of the community,’ Walker said. ‘We’re demanding that they give some of that money and land back in the hands of the community.'”

From News.com.au in Australia. “The RBA just admitted it didn’t realise how important housing is to the Australian economy, in a sign that it could push back hard against any further fall in house prices. Australia’s central bank just released its major quarterly report, the statement on Monetary Policy. In it was this gem of a line: ‘Recent developments have shown that dynamics in the housing market can have more pervasive effects than we had expected.'”

“There’s a meme that our economy is just houses and holes – i.e. real estate and mining. But the latest admission from the RBA is there’s more truth to that meme than they thought. And that’s disconcerting news for anyone hoping we can find a sweet spot where the economy grows healthily but house prices stay sane.”

“All this background is why their current statement arrives with such impact. They were for some time quite sure that a house price fall was worth it. Now, well, it is not so clear. Because now they understand better how deeply woven into the Australian economy housing is. That raises serious questions about whether, next time there is a natural downturn in Australian housing prices, the RBA might try to fight it.”

From Mortgage Broker News in Canada. “The Canadian Mortgage and Housing Corporation (CMHC) has been facing some heavy criticism from the broker community for a number of reasons, including its First-Time Home Buyer Incentive and its frequent and vocal support for the latest iteration of B-20 amendments.”

“At Mortgage Professionals Canada’s national conference this week, CHMC President and CEO Evan Siddall had a conversation with MPC President Paul Taylor in front of a packed house. ES: I will say that the fact that the [First-Time Home Buyers Incentive] isn’t as seful—it’s not un-useful, but it’s less useful—in higher-priced markets may be a design feature in the sense that the more people are exposed to higher-value homes, the more they’ve got to lose.”

“PT: What is the likelihood that the limits within the program will be increased in the event that you’re not meeting target?”

“ES: I don’t have a target. It may be—you’ll laugh, but—it may be that the reason we’re at half capacity is because it’s not as grand a problem as everyone says there is. We actually are helping first-time homeowners. We’re offering people a 5% equity opportunity to buy a home. And I need to say this: we should all be concerned about the health of our real estate markets. There’s a lot of academic research that says that the combination of high prices and high debt levels is very dangerous, and a ratio of disposable income to house prices of 80% is a problem. We’re at 100% in Canada. If you want to crash a real estate market, feeding debt is exactly the way to make it happen, I’m telling you. I’m trying to preserve healthy markets, which you should want.”

This Post Has 100 Comments
  1. ‘we’ve seen a home price boom since 2012, which has pushed home prices up quite a bit. For renters, rents have gone up kind of steadily and smoothly, not as much as home prices. But the wages haven’t kept up that they earn to pay the rent. So in either case, there is some suggestion of a problem’

    ‘One thing that I’ve been working on over the years is redesigning mortgages to help prevent the disaster of foreclosure and mortgages that have a automatic workout attached to them if home prices fall’

    Shiller is a fecking idiot.

  2. ‘Housing is how we build wealth in America’

    This is the absurd mentality that drives a lot of this. Shacks are an expense. The only way you can get “wealthy” is if some other poor bashtard takes out a 30 year loan and hands it to you and all the REIC parasites – with interest BTW.

    So we can add Warren to the list of fecking idiots.

    1. ‘Housing is how we build wealth in America’

      Speaking to an audience of idiots. Housing is how wealth is extracted.

      1. Housing has also destroyed wealth in the U.S.: millions of acres of valuable farmland have been paved over and covered in houses.

      2. I would argue that it’s more neutral with respect to wealth for the majority of homeowners*, at least compared to other forms of investment, savings, or business activity.

        Sure there are plenty of examples on both end, but most homeowners only own a single, primary residence which they need for it’s shelter services. How much “wealth” it generates for them in 10 or 20 years is not much concern compared to what it’s doing for them right now.

        Where it has been majorly perverted has been the promotion of borrowing against the supposed** ‘equity’ of the home to sustain consumer spending.

        * Individual homeowners. Institutional “homeowners” such as Invitation Homes have brought Wall Street demands and shenanigans to the sector.

        ** I say ‘supposed’ because until it actually is sold, you have no idea what the ‘value’ actually is – it’s whatever someone will pay for it at the time of sale.

  3. ‘Homeownership, particularly for entry-level buyers, is intertwined with politics and community in a way not comparable to other forms of economic activity’

    We need to get the guberment out of the shack lending biz. This would go a bigly way toward sorting this mess out.

    ‘Today it’s understandable why seeing aspiring homebuyers squeezed out of the market by all-cash institutional investors is problematic. But back in the dark days of the early 2010’s housing market, investors and cash buyers were just about the only game in town. Without them, America’s housing crash would have been much worse’

    Oh those “dark days” of much lower shack prices. Almost ever aspect of how this is discussed in the media is ass-backward.

    1. It’s curious how monetary policy conventional wisdom looks at the fall in price of any asset as a bad thing – deflationary. However, causing run-ups in asset prices is likely deflationary itself, by causing money which might be spent on other things to be bound up in assets. Make it long term deflationary for assets purchased with debt.

      These policy makers aren’t stupid – but they’re still just humans, and so limited by human foibles (the richest guy in the world or the most elite supersoldier or the highest level politician still defecates and have carnal desire, even though they’re one of the best at what they do).

      One can look at monetary policy through multiple lenses. The one that always seems to work is that it’s a tool to extract wealth from the society at large and concentrate it. If it’s deflationary so what? Gotta get while the gettin’s good. Warren has talked a good game but is she going to advocate limiting her own wealth and power? No. George Washington did it, after defeating the most powerful army in the world, and it was a once-a-millennium event, leading to the creation of the US. Warren wasn’t even honest about why tuition costs are so high (government pumping/insuring money lent to students for tuition) and instead focused on lower the interest rates for that money.

      The central bank of any nation is a tool of the government and the financial sector. I thought that Yellen or Powell piping the tune that Trump and Dimon dance to is rather silly. Politicians always want to (quietly) gain trade advantage through devalued currency, keep government borrowing costs low, (quietly) bring in more purchasing power (i.e. raise taxes – but again quietly) and spend a lot so they can exercise power through money. Wall Street is focused on profiting from that system.

    2. We need to get the guberment out of the shack lending biz. This would go a bigly way toward sorting this mess out.

      “Both religion and socialism glorify weakness and need. Both recoil from the world as it is: tough, unequal, harsh. Both flee to an imaginary future realm where they can feel safe. Both say to you. Be a nice boy. Be a good little girl. Share. Feel sorry for the little people. And both desperately seek someone to look after them—whether it be God or the State.”

      — Friedrich Nietzsche

      1. Would you rather have a Lord of the Flies scenario? Do you think you don’t need other people to survive?

        1. The market place provides reliance on ‘other people to survive. Your God, the omnipotent State, relies on force and psychopathic bureaucrats.

          1. Maybe it’s different this time, but historically, command-and-control economic systems have eventually landed squarely in the toilet. Case in point: The late, great U.S.S.R.

    3. “…it’s more neutral with respect to wealth for the majority of homeowners*, at least compared to other forms of investment, savings, or business activity.”

      Sure it is, if you cherry pick your HODLing period to include historically unprecedented appreciation rates, and exclude certain pesky carrying costs from the maths.

  4. ‘Out of 10 high-end apartment buildings in downtown L.A., the researchers found an average vacancy rate of more than 70 percent in April 2019. A modestly sized one bedroom in one of these buildings can easily rent for more than $3,000 a month’

    If they can easily rent, why are they 70% vacant?

    1. “In Los Angeles, vacant housing could provide accommodations for the city’s entire homeless population of at least 36,000 people, with more than 5,000 units to spare.

      What’s the term I’m looking for here to describe attempting to connect two disparate things that actually have no connection?

      ( I don’t know what the actual percentage is, so I’ll just say it’s 90% – we can argue the actual value.)
      ———-

      I would assert that 90% of the homeless here on the west coast, if given one of those vacant homes for free – No mortgage, heck even no property taxes for ten years – would not become successful homeowners.

      They would not be able to generate the income needed to furnish, sustain and maintain the home. Most of them would actively choose not to work. And if they found they could sell the home, or borrow against it for a quick hit of money, a majority of the would. The homes themselves would fall into disrepair, and trashed/stripped. They would be used for and become a center of illegal activity. And they would have a negative effect on everyone nearby.

      That is to say I assert that the majority of homeless aren’t interested in, or capable of* being homeowners, with all that it entails – desiring to be part of their community and maintain their home in the same ways and play by the rules that people who actually have skin in the game do. They have no problem taking, and lying and working the system to maximize their take, but little to no interest to do anything to earn what they get.

      * ‘ capable of’ – a lot of homeless have mental or other issues which are going to prevent them from ever being fully functional members of society. We used to house and take care of them, but no more.

      1. MGSpiffy,

        I could not agree with you more on your analysis of just giving the homeless homes.

        Also, just engaging in faulty lending and giving people home loans that they don’t qualify for is a set up for a big fall.

      2. And if they found they could sell the home, or borrow against it for a quick hit of money, a majority of the would.
        https://www.inquirer.com/business/profiting-lead-poisoning-victims-baltimore-maryland-lawsuit-freddie-gray-20190121.html

        One of their customers was Freddie Gray, who was poisoned by lead paint long before his death in police custody plunged Baltimore into riots in 2015.

        Gray and his two sisters sold $435,000 of their settlement – valued at $280,000 – for about $54,000. A Prince George’s judge, to whom Access Funding funneled most of their cases, approved the deal. Neither Gray nor his sisters were in court for the approval.

      3. Yes, but if instead of giving it to them, you sold it to them for a very low price they would be 10x more likely to succeed. When you feel like you had to work for something, you value it more.

  5. “If they can easily rent, why are they 70% vacant?”

    The only solution is to build more. There must be a shortage. How many illegals can you house in one of those units? I think if you can get twenty in there they can pay the rent.

    1. “Green” Tom (not to be confused with Tom Green) had showed him the path. Do you think the progressive voters might figure out that if all these billionaires support policies similar to theirs it might be because the policies really support billionaires? Nah, that takes logic not emotion, support the green new deal, open borders, and “free trade” millennials and pay three thousand dollars a month for a one bedroom, you are making a billionaire richer, it is a worthy cause.

      1. Michael Bloomberg is brilliant, capable, and successful, which makes him a marked contrast with the rest of the Democratic presidential contenders. While he may be every bit as unscrupulous and unprincipled as the rest of them, I suspect he’s intelligent enough to grasp that wealth inequality in America is a ticking time bomb that has to be addressed in a meaningful way unless the oligarchs want to see the pitchforks and torches coming for them, which is really not in anybody’s interest. As such, although I don’t agree with his politics or rabid anti-gun stance, he’s probably the least bad option on the Democratic side, and might even surprise to the upside if elected.

        1. He’s an ass-hat who thinks he can tell people how big their slurpys can be. Him running says “Biden you are fooked.”

          1. All of the Democrats are collectivist control freaks – there is no other kind of Democrat. He’s just the least bad option of the bunch, and is probably smart enough, unlike Fauxahontus or Beto, to realize that the globalists and their leftist cats-paws would be ill-advised to provoke a civil war that would end very badly for them.

        2. Boo, I really cannot understand your defense of him, he is a globalist who has been pushing that agenda all along. He spent millions for vote harvesting in the last election to put the clown Schiff in the position to impeach Trump. He wants to take away I final defense against globalists tyranny. The fact that he may be smarter than his puppets Obama and most of all the globalists clowns running for president is not an asset in my opinion it is a liability since he is more likely to be able to impose his tyranny.

          1. Who would you rather see elected, the monkey or the organ grinder? At least with the organ grinder it’s clear to everyone that the oligarchs aren’t running things from behind the scenes; they ARE the scene. I’d rather have that out in the open. I may not like Bloomberg, but I respect the fact that he’s intelligent and capable. That possibly means he’s pragmatic to a certain degree because he knows better than to needlessly antagonize Les Deplorables who are already fed up to their back teeth with Leftist dogma, Clown World social lunacy, and collectivist theft of the fruits of their labor, unlike Fauxahontus, Beto, and the rest of the collectivist ass-hats. Yeah, it’s a slim hope, but it’s a lot more than I can say for the rest of the Democratic field.

          2. Bloomberg, the Koch brothers and George Soros, they funded different factions of the uniparty for years but when it came to the last election they were all united in funding the opposition to Donald Trump and funding the vote harvesting operation which proved decisive. That ought to tell the working class all they need to know. The globalists loved 1988, 1992, 1996, 2000,2004,2008, 2012 and 2016, because their candidates were running against each other for president although they did have a meltdown that McCain put Palin on his ticket. However, this year the thought of Bernie running against Trump was keeping them up at night.

  6. ‘Fitch Rating added more than 80 new performance metrics across a wide variety of servicing functions including delinquent account collections, loss mitigation metrics, loan accounting, customer relationship management, and default administration to better assess servicer performance now and identify trends in real time.’

    ‘According to Fitch, new rules and best industry practices have positioned U.S. Residential Mortgage Backed Security (RMBS) servicers to maintain consistent performance come the next housing market downturn, though new servicer metrics introduced by Fitch Ratings are showing some disparity in loan workout application completion rates among some servicers.’

    ‘Earlier this year, Fitch found that RMBS servicers are better equipped and better prepared for another financial crisis, according to Fitch Ratings. Fitch’s latest U.S. RMBS Servicer Handbook indicates that servicers are now better positioned than they were before the financial crisis, due to new technology and improved regulatory compliance over the past 10 years.’

    ‘Fitch’s newest analysis shows that loan workout application processing has on the whole improved post-crisis, while closed loan modifications performed consistently well among Fitch’s servicer group at 6-, 12- and 18-month intervals post-closing. With respect to delinquent account collections, one of Fitch’s new metrics, servicer performance was largely consistent among our servicer group when measuring successful promises-to-pay ratios in the 30-59 day, 60-89 day and 90+ day delinquency buckets. However, another new Fitch metric, loss mitigation metrics, reports that the disparity in reported loan workout application completion ranged from the low teens to 70%.’

    https://dsnews.com/daily-dose/11-20-2019/strengthening-rmbs-servicing

    You can see they are now rating servicers on how well they foam the runway with today’s suckers.

    If the markets are so strong, why not ditch the rule that let lenders hoard shacks? Shirley it isn’t needed any more. But we read about 3,000 abandoned semi-foreclosed shacks in Spokane recently. Why that town is red hot!

  7. ‘There’s a meme that our economy is just houses and holes – i.e. real estate and mining. But the latest admission from the RBA is there’s more truth to that meme than they thought. And that’s disconcerting news for anyone hoping we can find a sweet spot where the economy grows healthily but house prices stay sane’

    Central bankers don’t have a clue where shack prices should be. This little discussion hides the fact that Bernanke and all the other idiots purposefully drove up shack prices to save their globalist asses.

    ‘Central banks may do more harm than good, says head of India’s central bank’

    June 18, 2016

    “A bridge that relies on wealth effects, you better hope that you got enough growth to justify the asset price increase which created the wealth effect in the first place.” – Raghuram Rajan

    https://www.marketwatch.com/story/in-interview-indias-rajan-says-monetary-policy-has-run-its-course-2016-04-15?siteid=yhoof2&yptr=yahoo

    1. Yes, thank you for the reminder here. I wish more people understood the derangement of unelected and unaccountable central planners determining interest rates, the supply of money; pretty much all aspects of a national economy. As if they could do this without causing catastrophe after catastrophe. Three ginormous asset bubbles in two decades, not to mention the Great Depression and everything in between. I think you’d have to try really hard to do this, or be either an idiot or a deranged psychopath. What hubris. What insanity.

      The Federal Reserve Bank – “Doing more harm than good since 1913.”

      CHICKENS COME HOME [to roost] (1931)
      Oliver Hardy : ” Well…”
      Stan Laurel : “Here’s another nice mess I got you into.”

      1. Ab$olute Indemnification$ = NO CON$equence$!

        What penaltie$ did Volcker per$onally $uffer for this financial in$tigation?

        The Federal Reserve board led by Volcker raised the federal funds rate, which had averaged 11.2% in 1979, to a peak of 20% in June 1981. The prime rate rose to 21.5% in 1981 as well, which helped lead to the 1980–1982 rece$$ion, in which the national unemployment rate rose to over 10%

    2. “Bernanke and all the other idiots purposefully drove up shack prices to save their globalist asses.”

      Was it even legal? What gave them the right to massively redistribute wealth and make high risk gamblers whole on their gambling losses?

      1. “Bernanke and all the other idiots purposefully drove up shack prices to save their globalist asses.”

        The .com run-up really was different as the experts were confident that companies with a website no longer needed to generate a profit. Eventually gravity pulled them back to earth, and the .com bust crushed investors worldwide. Greenspan thought home equity would revive the economy, but homeowners without a mortgage didn’t bite. So it was time for easy credit to inflate asset prices, which could then be easily leveraged, e.g., the HELOC.

  8. “Denver continues to be a premier destination for job seekers in this growth cycle, but net migration and total employment growth is decelerating from their peaks set earlier in the cycle.”

    Translation: they’ve stopped moving here and more are moving away.

  9. – So much fodder for snarky comments; where to begin? 🙂

    From [“The Experts” at] Mortgage Broker News in Canada.

    “There’s a lot of academic research [common sense] that says that the combination of high prices and high debt levels is very dangerous, and a ratio of disposable income to house prices of 80% is a problem. We’re at 100% in Canada. If you want to crash a real estate market, feeding debt is exactly the way to make it happen, I’m telling you. I’m trying to preserve healthy markets, which you should want.”

    – And yet, here we are. It’s almost as if a viral financial pandemic has infected every housing market in the world. Brought to you by the magic of global central banks. Someday, somebody in the media will connect the dots. Maybe that’s why “#learntocode” is such a popular meme…

  10. A weekend topic starting with NPR. “This week’s Democratic presidential debate touched on a topic that usually doesn’t get much attention in these forums. ELIZABETH WARREN: Our housing problem in America is a problem on the supply side. And that means that the federal government stopped building new housing a long time ago, affordable housing.”

    “Nobel laureate economist Robert Shiller joins us. SHILLER: For buyers, we’ve seen a home price boom since 2012, which has pushed home prices up quite a bit. For renters, rents have gone up kind of steadily and smoothly, not as much as home prices. But the wages haven’t kept up that they earn to pay the rent. So in either case, there is some suggestion of a problem.

    – From Fauxahontas central.

    https://www.dailymail.co.uk/news/article-2153832/Elizabeth-Warren-accused-making-fortune-flipping-foreclosed-homes.html

    Elizabeth Warren accused of making a fortune from flipping foreclosed homes
    By Daily Mail Reporter
    Published: 15:28 EST, 2 June 2012 | Updated: 15:28 EST, 2 June 2012
    Harvard professor and U.S. Senate hopeful Elizabeth Warren is back in the headlines after it was revealed that she took part in around 12 lucrative real estate deals using manoeuvres such as ‘flipping’ properties to make profits.

    Warren has in the past rallied against predatory banks and heartless foreclosures but that didn’t stop her using the controversial tactics to make fortunes.

    On her website she writes: ‘We are in the midst of one of the greatest economic crises in our country’s history — a crisis that began one lousy mortgage at a time’.

    In a statement issued on Saturday her campaign wrote: ‘Elizabeth and (her husband) Bruce are fortunate to be in a position where they can help their family.

    ‘They have been able to help relatives buy their homes and her nephew — a contractor — fix up houses.’

    “How do you know when a politician is lying? His [or her] lips are moving.” – Favorite Old Joke

  11. – From “the pot calling kettle black” category…

    From Bloomberg Opinion. “Democratic presidential candidate Elizabeth Warren attacked Wall Street firms on Monday for buying houses in the wake of the financial crisis, arguing that it contributed to the country’s growing inequality.”

    “Today it’s understandable why seeing aspiring homebuyers squeezed out of the market by all-cash institutional investors is problematic. But back in the dark days of the early 2010’s housing market, investors and cash buyers were just about the only game in town. Without them, America’s housing crash would have been much worse.”

    – Never mind that the same cartel of Wall St. “investors” and Federal Reserve Bank were key players in causing the GFC. And yet, the losses were somehow pushed onto Main St.

    “We’re essentially continuing a system where profits are privatized and…losses socialized,” – Nouriel Roubini

    – History repeats (or at least rhymes)…

    “I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. … You are a den of vipers and thieves.” – Andrew Jackson, 1834, on closing the Second Bank [Central Bank] of the United States; (unabridged form, extended citation)

  12. ‘Some of the biggest names in finance are warning that the government’s plan to return Fannie Mae and Freddie Mac FMCC to private ownership risks disrupting a market critical to the U.S. housing system.’

    ‘The investors, including BlackRock Inc., Fidelity Investments and Pacific Investment Management Co., have told the Trump administration that any move to privatize Fannie and Freddie should include an explicit guarantee of the $5 trillion in mortgage-backed securities they issue, which only Congress can provide, according to people familiar with the matter. The Trump administration, by contrast, says it is willing to move forward without such a guarantee, arguing that it is past time for the government to reduce its role in housing.’

    “The structure and significance of the guarantee remains a sticking point given its centrality to the discussion,” said Isaac Boltansky of Compass Point Research & Trading, which serves large, institutional investors. “The guarantee itself means not only deeper, more liquid markets but also cheaper borrowing costs for consumers.”

    ‘The arrangement gives the mortgage-finance companies special market advantages that could encourage them to take on risky loans on the assumption that they would be bailed out by taxpayers in the event of a crisis—a phenomenon known as moral hazard.’

    https://www.wsj.com/articles/firms-warn-of-risks-in-plan-to-take-fannie-mae-freddie-mac-private-11574591423

    1. “The Trump administration, by contrast, says it is willing to move forward without such a guarantee, arguing that it is past time for the government to reduce its role in housing”

      So, the theory is that dtRumpsis & the Repubican$ can politically thrive after a complete Housing Collap$e.

      Got popcorn?

      1. “…it is past time for the government to reduce its role in housing”

        That’s awesome. Let’s see if they can pull it off, though!

        There’s no reason to assume that this would result in anything other than the accidental achievement of Uncle Sam’s elusive, long-sought affordable housing goals.

        1. I really do not think affordable housing had been the goal of US government since Reagan. Ever higher housing prices to support more consumption of third world goods has been the goal of the Globalists. They do not want housing prices to fall until global governmentnis achieved. The real panic is not AGW but the fact that the Globalists do not see how to keep housing prices up for 12 years in the developed countries so they must use fear of CAGW to achieve world government before the big collapse.

  13. ‘Sen. Elizabeth Warren (D-Mass.) denied sending one of her children to private school despite evidence that her son did attend such an institution. Warren, 70, was at an event in Atlanta when parent Sarah Carpenter told her: “We are going to have the same choice that you had for your kids because I read that your children went to private schools.”

    “No, my children went to public schools,” Warren responded.’

    ‘The exchange was over school choice, which Carpenter advocates for and Warren used to support but doesn’t any longer. Warren’s campaign later issued a statement after the Washington Free Beacon obtained a school yearbook from Kirby Hall School, a college preparatory school in Austin, Texas, showing her son went there. Tuition at Kirby runs nearly $15,000 for kindergarten through fifth grade.’

    https://www.theepochtimes.com/warren-caught-on-video-contradicting-her-childrens-school-history_3155192.html

  14. “It did represent a transfer of wealth from stressed homeowners to the wealthy, contributing to inequality, but it also stabilized the housing market and local economies at a time when there were no other buyers.”

    Having been someone who saved up to buy distressed properties in the last bust, I take issue with the second “truth”. It turned out to be quite difficult to get access to those properties at least in California. I think there were plenty of other people like me but the same scam artist monkeys who caused the bubble in the first place just jumped to another branch on the tree and rigged and monopolized the foreclosure markets. It was just an extension of the preexisting systemic fraud in the housing market.

    1. It was just an extension of the preexisting systemic fraud in the housing market ??

      +1…Maybe the quote of the year…Spot on…I agree…

    2. “…but the same scam artist monkeys who caused the bubble in the first place just jumped to another branch on the tree and rigged and monopolized the foreclosure markets.”

      Buying foreclosures en-mass kept the market value from appearing on main street, which kept home values from falling. You can thank the central committee, comrade.

  15. I agree with this statement.

    “It did represent a transfer of wealth from stressed homeowners to the wealthy, contributing to inequality, but it also stabilized the housing market and local economies at a time when there were no other buyers.”

    However, the government bailed out the banks to enable them to stabilize the housing market and increase wealth inequality. This is considered Capitalist.

    Next time, bailing out the homeowners should produce the same results and be better for the overall economy. However, this would be considered Socialist.

    1. If I was President in 2007-2008 (Bush), and Obama(2009), I would have mixed Capitalism and Socialism by bailing out Primary Homes( Tax returns report this) and letting the banks/homeowners succeed or fail on second homes and investment properties without a bailout.

      This would have stabilized the Primary Home market and driven the speculation down to zero.

      Vote for me in 2020.

      1. ” …driven the $peculation down to zero. ”

        What would this do to $helter.$hack $peculation$?:

        The Federal Reserve board led by Volcker raised the federal funds rate, which had averaged 11.2% in 1979, to a peak of 20% in June 1981. The prime rate rose to 21.5% in 1981 as well, which helped lead to the 1980–1982 rece$$ion, in which the national unemployment rate rose to over 10%

        1. After which Reagan was able to create prosperity despite historically high interest rates. Reagan inherited an economy in worse shape than Obama since it had both high inflation and was already in a recession. He did not spend eight years blaming his predecessor, he fixed the problems. God bless Reagan and God bless Trump.

          1. ” Reagan was able to create prosperity despite historically high interest rates. ”

            How long had Ronnie Raygun El Presidente in 1985?

            Yer quiet the Repubican Revi$ioni$ta aqdan!

            “In the 1980s, family farmers faced a crisis the likes of which hadn’t been seen since the Great Depre$$ion. Plummeting farm product price$ and land value$, ri$ing intere$t rate$, troubled credit market$ and unfair lending practice$ pushed tens of thousands of farms out of business, forcing million$ of people off their land.

            Long haired bearded ones to the re$cue!

            September 22, 1985
            Farm Aid: A Concert for America
            Farm Aid started as an idea at the Live Aid Concert when Bob Dylan said on stage, “Wouldn’t it be great if we did something for our own farmers right here in America?” Willie Nelson, Neil Young and John Mellencamp agreed that family farmers were in dire need of assistance and decided to plan a concert for America.

            The show was put together in six weeks and was held on September 22, 1985 in Champaign, Illinois before a crowd of 80,000 people. It raised over $7 million for America’s family farmers. Performers included Bob Dylan, Billy Joel, Bonnie Raitt, B.B. King, Loretta Lynn, Roy Orbison, Tom Petty and many more.

          2. Reagan was the beginning of massive deficit spending and driving the US debt to infinity. It took Clinton to fix this.

            If you want massive government spending, you really should vote for a Socialist. Trump is doing the same but borrowing instead of taxing.

            If you think debt is better, I feel sorry for our future.

        1. I agree!

          However, Clinton/Bush loosening government oversight on loans drive the US economy and housing onto the rocks.

          Bush was the drunk incompetent captain of the ship who crashed us all onto the rocks. Bush controlled the Presidency and the Republicans controlled Congress leading to this disaster.

          Please vote for this again if you are an oligarch.

          1. Beat$ x5 Trillion$ for Islamic “Nation.Building” … $till growing poppie$, $till $ucking oil from the $and.

      2. https://www.heritage.org/sites/default/files/2019-04/SR213_Web.pdf
        Comparing Free Enterprise and Socialism
        David Burton
        April 30, 2019

        SUMMARY
        What is being offered by contemporary socialists are fairy tales, and we should not mistake them for the truth. These portrayals of socialism and their caricature of capitalism are inaccurate, vacuous, and utopian. Socialism takes from those who work, take risks, innovate, educate themselves, or save and gives to those who do not—or to those who have political power. A century ago, at the advent of the Russian Revolution, one could be a socialist and hope in good faith that socialism could achieve, or at least advance, its utopian aspirations. Now, socialism has a long record of dismal failure. In fact, it has been tried many dozens of times and failed each time.

        KEY TAKEAWAYS
        The U.S. economic system today is a hybrid of free enterprise and socialism with a strong element of crony capitalism.
        Socialism has a long record of failure and has been tried many dozens of times. It is arithmetically impossible to pay for the progressive agenda by taxing the rich.
        In addition to being ethically superior to socialism, free enterprise has a record of increasing incomes and reducing poverty.

        “Socialists are happy until they run out of other people’s money.” – Margaret Thatcher

        “The enduring lesson of the 20th century is that socialism is a failure, and free markets are a success. But the politicians keep advocating just a little more socialism.” – Milton Friedman

    2. “…at a time when there were no other buyers.”

      Of course there’s no other buyers when the Fed and its rich friends, flush with zero interest Yellen bux, can easily outbid Mom and Pop Saver.

      1. Exactly Professor. That was no save, it was opportunistic purchasing of housing inventory by investment/business interests and our own government shoving a lot of individual home buyers out.
        Politicians don’t want economic cycles at the trough end of things to happen on their watch or at least definitely not in their re-election year. This political “need” does its part to blunt cycles and enable a sickly market whether that be in real estate or the general economy.
        “Homeownership, particularly for entry-level buyers, is intertwined with politics and community in a way not comparable to other forms of economic activity…” Homeownership should first and foremost be seen as the physical shelter humans require. What Shiller is working on as a kinder mortgage is another enabling tool lowering the risk factor for a buyer to purchase. A new way to distort the markets and plug up the cracks in the dam with play “dough”. Mr. Shiller needs to take a rest on his Laureate and rethink what needs fixing.

  16. Mortgage calculator
    MONTHLY PAYMENT PURCHASE BUDGET
    $1,200,000 Home price
    $24,000 | Down payment 2%

    Loan term
    15 Year Fixed 2.85% Interest

    Total monthly payment $10,421
    Loan $8,037
    Property tax $1,250
    Home insurance $350
    PMI $784

    Let’$ add + 10% :

    Mortgage calculator
    MONTHLY PAYMENT PURCHASE BUDGET
    $1,200,000 Home price
    $24,000 | Down payment 2%

    Loan term
    15 Year Fixed 2.85% Interest

    Total monthly payment $17,147
    Loan $14,763
    Property tax $1,250
    Home insurance $350
    PMI $784

  17. “The best action would have been to do nothing.”

    No, the best action would have been to do what Trump has been doing.
    A supply side tax cut and tariffs on China would have been very effective. In fact, it would have been even more effective in 2009 because less industry had left the US and our national debt was $9 trillion dollars less giving us more flexibility, we could have added an infrastructure bill truly designed to make us more competitive. No mob museums in Las Vegas and make work social programs, just real infrastructure. Nothing needed to be done on housing except for letting the bubble contract, if the rest of the economy was humming, people could work making goods not in the bloated FIRE economy which was expanded to employ people who were laid-off due to China’s growth in manufacturing.

    1. “A supply side tax cut and tariffs on China would have been very effective.”

      And bullying FedRes into negative rate territory, eh?

      1. The Fed has given Trump negative rates? He knows he will not get them however he is pointing out that many central banks have gone to negative rates and the difference between our rates and their rates makes the dollar too strong. It is the way he negotiates.

  18. Poway, CA Rental Rates Crater 11% YOY As San Diego County Housing Prices Tank

    https://www.zillow.com/poway-ca/home-values/

    *Select price from dropdown menu on rental chart

    As a noted economist stated, “Why buy a house when you can rent one for half the monthly cost. Buy it later after prices crater for 70% less.”

  19. “SHILLER: One thing that I’ve been working on over the years is redesigning mortgages to help prevent the disaster of foreclosure and mortgages that have a automatic workout attached to them if home prices fall.”

    That would worsen the divide between the housing haves and have-nots. Boomer Bob and his rich homeowner friends would have a guarantee against foreclosure. Home prices would rise to reflect the reduced foreclosure risk, and more Millennial renters would be priced out of the owner-occupied market, at least until Boomer die-off is well underway.

      1. Putting down 20% in a market dominated by low-or no-downpayment mortgages are the norm is a great way to expose yourself to massive financial losses in the next downturn.

        1. holding out hope for a return to that plus 7-9% mortgage

          Might not hurt to have a Plan B. My FIL’s mortgage taken out around 1960 was still at 3%. That was 30 years after the start of the Great Depression.

          1. The world of 7 to 9 percent interest rates only existed when developed Nation’s governments would not monetize debts. That world ended during the Obama administration. Money printing is not just for third world dictators anymore. Why would a government pay 7 percent interest when it can pay itself 3 percent interest by just creating the money out of thin air and then calling the bond an asset of the federal reserve and actually make money on the debt?

  20. I don’t think I would of bailed out anybody when the housing crash happened.

    It was a BK matter regarding any. entity that was. holding fraudulent loan paper. It was a Judicial matter regarding loan paper investors suing the banks for fraudulent loan paper.

    A high percentage of the home loan borrowers were fraudulent on their loan application and were actually speculating, or using the home as a ATM machine. Real end users of housing who qualified for the loan and put a lot of money down were the victims of the false RE market, and maybe people who invested in loan paper in the secondary market where they rated F paper AAA paper.

    This was a Wall Street creation of marketing home loan securities based on faulty and fraudulent lending while mis-rating the paper.

    They didn’t even record the loans in accordance with the law if the truth be known, and that would of rendered the bulk of loans null and void.

    But, bailing out the culprits of the massive fraud seems to be beyond a moral hazard.

    It was most likely the biggest
    fraud done, and people don’t even know how they leveraged loans by times 40 using real estate as the underlying asset.

    The net result of the culprits in a massive crime being bailed out is that we have false markets today and no meaningful correction of what went awry to begin with.

    Now we have more loss potential backed by the US taxpayers. We have presidential candidates wanting US taxpayers to pay other debt and countless free shit offered.

    I knew that the bail out was going to be a moral hazard but I didn’t know it would usher in Communist thought.

    1. The Financial Times
      Opinion US economy
      Gold is looking more and more attractive
      Rising US liabilities for entitlements could undermine the dollar
      Rana Foroohar
      Gold Investor / Prospector
      © Matt Kenyon
      Rana Foroohar 6 hours ago

      Gold bugs have always struck me as paranoid. You have to really believe the sky is falling in order to horde physical bars in a digital age. So, it’s rather worrying that some investors and central bankers are talking up gold.

      The Dutch Central Bank recently argued in an article that if there were to be a major monetary reset, “gold stock can serve as a basis” to rebuild the global monetary system. “Gold bolsters confidence in the stability of the central bank’s balance sheet and creates a sense of security.”

      Talk of gold, however, does not. Investor Ray Dalio recently spooked attendees at the Institute for International Finance conference when he mentioned the possibility of a flight to gold because of his concerns about America’s fiscal position.

      That is not a new point. Since at least 2016, financial titans including JPMorgan chief Jamie Dimon and hedge fund manager Stanley Druckenmiller have pointed out that unfunded pension and healthcare entitlements are a looming iceberg for the US economy. Indeed, one theory about the recent crisis in the “repo” overnight lending market is that it was caused by the federal deficit and the increasing unwillingness of investors outside the US to fund it.

      But Mr Dalio went further, concluding that the American entitlement crisis meant the US Federal Reserve would have to continue to inflate its own balance sheet indefinitely, and keep rates low (or even negative) well into the future so the US could keep paying its bills.

      That would depreciate the US dollar. Taken to its extreme, that never ends well. Prior experiments with rapidly falling currencies include late-third century Rome, Germany’s interwar Weimar Republic and Zimbabwe.

      1. Ok, the only thing that might get us out of this mess with the least amount of pain would be plentiful good paying jobs in the private sector. Production jobs and manufacturing jobs also. Being a productive Nation.

        Look we can’t live on selling overpriced homes to each other for wealth creation.

        Good jobs will float all boats and it will restore USA to it’s former prosperty. Whatever it takes to put the Globalist and Wall Street back in their place. It’s complex on how it can be done, but it doable.

        You can’t have price sitting monopolies anymore either in order to correct this mess of rigged markets.

        Government has to be put in it’s place also as to what it’s proper function is, likewise the Judicial wing of government.

        It also might mean that endless wars might not be in the best interest of this Country or the World for that matter.

          1. Exactly BlueSky.

            If you want to be a US Company you have to invest in America. If you want to be a Globalist Company than you have to pay a tax penalty or tariff if you want cheap labor world wide yet still sell to US consumers.

            Gutting our job base also results in less taxes collected

        1. Here’s a point of view I ran across on the internet that I feel is worth pondering …

          Taxes = Against local companies.
          Tariffs = Against foreign companies.
          High Taxes and Low Tariffs = Suicide.
          Low Taxes and High Tariffs = Boom on employment.
          No Taxes and No Tariffs = Free trade with High Unemployment.
          The USA has being having High Taxes and low tariffs for a long time. Companies where getting rewarded for having their business OUTSIDE of the USA and get punished from having them inside the USA. Which is IDIOTIC no mater how you look at it.
          Trump just changed that to punishing having your business OUTSIDE of the USA and rewarding having your business INSIDE the USA. Of course IMPORTERS call bloody murder as they where making easy money selling the country down the river.

  21. “Subprime is contained.”

    — “Zimbabwe Ben” Bernanke

    “Business debt does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm to households and businesses should conditions deteriorate. Moreover, banks and other financial institutions have sizable loss-absorbing buffers,” he said. “The growth in business debt does not rely on short-term funding, and overall funding risk in the financial system is moderate.”

    — Jerome “Janet” Powell

  22. I so hate to bring you such bad news today,
    But Santa has taken his rally away.

    Instead of Christmas lights, presents, and cash,
    An earnings recession will cause a big crash.

    1. The first picture is obviously a rather poor fake, and has been further doctored since I last saw it. Just sayin.

        1. The shadows on the girl do not match the shadows on the woman and there are no shadows from the man at all. The shadow on the railing to the left were a big tell but have been cropped in this version as well. You can still find the other version on the net. Also, the man is hugging the girl but they are not actually touching at the waist. There are other minor clues. Just my own opinion.

        2. Seems like the evidence collected from Epstein’s vault is being carefully guarded. Gotta wonder how many years Queen Elizabeth II has been paying Epstein a tithing?

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