Current Financial Mess 22

[cjd97]

I thought that a group of Engineers would be the perfect audiance to ask the question......Is this financial crisis being talked about on TV for real? What do you guys think?

A large part of me doesn't feel sorry for people who bit off more than they could chew with their mortgage. I also don't feel sorry for the banks who wrote the bad mortgage. I personally think we should let the banks fail, let the people lose their houses, and get back to the old times of actually sharing risk when lending/borrowing money, ie having 20% down to buy a home.

Kind of a side note, with everyone supposedly losing their homes and the banks not being able to liquedate them, where does the PMI insurance come into play? I would assume these folks are paying PMI if they are "subprime" loan canidates. Isn't PMI designed for situation such as this?

Just wondering your thoughts.

 

[davidbeach]

OK, sure anybody except financial institutions. The whole bailout mess is totally misguided. The financial institutions need to take their medicine and have a severe spanking at the same time; they're the ones that really should have known better. Sure the people who took out mortgages that seemed too good to be true should also have known better but this whole mess would have been avoided if the financial institutions had been prudent, no matter how irresponsible the borrowers turned out to be. In this case the financial institutions needed to be the "grownups" and show some restraint.

 

[moltenmetal]

The idiotic US tax break for mortgage interest has at least something to do with this. Why a nation wants to encourage people to go into hawk up to their eyeballs is beyond me.

Speculation is behind the rest. And indeed, the results WERE predictable. Buying on speculation with borrowed money was the underlying cause of the 1929 crash. Every time, the greedy think the boom will last. As in the case of every past boom, this one didn't last forever. Those who bought on spec, or more properly those who loaned the money to those who bought on spec, were left holding the bag. Of course those "on spec" loans were packaged and re-sold as "commercial paper", so the real crooks- the ones who gave the mortages in the first place- aren't necessarily the ones who are getting hurt this time around.

 

[bvanhiel]

Moltenmetal:

Unless you're typing from your private island in the caribbean with private satalite internet then you didn't predict it either....

Hindsight is 20/20. If bubbles were predictable, then they wouldn't exist. Even if you think you're over the long term average you won't know if the market will correct or by how much.

-b

 

[DonPE]

In the last few decades, the power of unions has decreased to only a small percentage of non-governmental workers; to blame them for the current fiscal problems is silly since they weren't much of a player in the financial decisions of Wall Street.

In their heyday, unions provided a great buffer to the exploits of business, and with their higher wages, the members able to afford a good standard of living, and also provided purchasing power to the business' goods. They were effectively a mass consumer of the goods that the businesses produced.

By destroying unions since the 50's, businesses have had no political or economic opponent to their greed. Wages stagnated or decreased for a vast majority of Americans over the decades. Savings diminished and the use of credit increased. By removing real monies from a large percentage of the population, businesses effectively cut the hands that feed them. This has been analagous to a poker game where the winnings are concentrated in the hands of fewer and fewer players; the guys can only keep playing if they borrow. This is fine until the credit dries up, at which point the game stops.

There will be political and social backlash against all the greed and excesses; whether it will result in renewed interest in union membership remains to be seen.

 

[moltenmetal]

bvanhiel: predicting THAT something will happen eventually is very different than predicting WHEN it will happen. THAT the US housing market would implode was entirely predictable: knowing precisely WHEN it would happen or what would be its trigger (ie. so that you could maximally profit from it) is impossible.

I'm typing from Canada- I don't need a trip to the Carribean, thanks. Our banks didn't do the same idiotic mortage lending that many of yours did. And our housing market saw a run-up nowhere nearly as steep as yours was, nor is the landing on the downside expected to be nearly as dramatic as yours continues to be. Like banks worldwide, some Canadian banks bought the resulting commercial paper and got their knuckles rapped, but some others are now looking for bargains amongst the US banks.

 

[TheTick]

One thing that saddens me is that the housing market is so depressed that I can not sell my current house to snap up one of the fine properties up for sale.

 

[DesignerGuy16]

My house sits vacant 12 hours away because I had to find new work out of state. At this rate it will never sell and it'll be years before I can save to purchase a new home.

James Spisich
Design Engineer, CSWP

 

[ctopher]

Tick,
Same issue here. There is a house for sale across the street from for sale. the owner died and his two adult children don't want it.
It's much bigger than my house and selling approx 150k more than what my house current market.
But, I can't sell mine because houses here are not selling.
It is cheaper for me to add on or build up.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

 

[PBroad]

SEC Chairman Chris Cox allowed naked short selling ever since he took up the position in 2005, as have all others before him despite the fact that naked shorting is illegal.

This was probably "necessary" to raise cash to offset the money drain in Iraq, which was also illegal.

But then the US has a long establidhed practice of appointing senior administrators based on favors owing such as Michael Brown at FEMA.

IN UK this practice was abolished in the 1832 Reform Act

 

[bvanhiel]

moltenmetal,

I don't agree. If someone knew for sure that the housing/credit/financial market would crash, then there was lots of money to be made. But nobody did, or at least not enough people who would put their money where their mouth is.

The crash might never have come. It might have been a slow deflation. It might have been that the market moved gently to a new equilibrium with easy credit. You, and everyone else, were afraid to take that gamble.

 

[ctopher]

I'm writing a letter to our 'Pres' asking for a bailout of my son's college tuition.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

 

[Zapster]

bvanhiel,

Lots of people recognized that the housing market in the United States would crash, especially those areas with the fastest appreciation, warnings of Freddy and Fanny problems were numerous, California was ahead of the nation in artificial prices, etc.; however, no one rings a bell at the top or bottom of the market. A willingness to bet on the market timing and having the capital available are the items needed to profit in the housing market regardless of whether it is climbing or dropping. There are a lot of folks that have sold near the top and are ready to throw cash into the market once they recolonize that the housing market has bottomed.

 

[bvanhiel]

Zapster,

Not enough of them to move the market.

-b

 

[evelrod]

Sometimes with age and experience comes wisdom. I've lived in Socal for 42 years and have seen these housing bubbles several times and, finally, I figured out how to recognize one when it bonks me on the head. Greed, the key, ya think? Lots of buyers getting into ARM's to be able to buy $350k and $450k homes in my area...one in particular that had an "interest only" of $2100/mnth for three years. Insane!
Needless to say, we all know where that went. I bought my house for $82,500 and it's been as high as (free appraisal paid for by Century 21 in June, 2006) $660,000. Now that really is nuts. There is now way in hell this house is worth more than $350k at best. No matter, I did not move here to make money...this is home and I'll probably die here, hopefully in at least another 20 years.

Rod

 

[dvd]

I echo the pro-union sentiments of other writers here. I don't buy into the arguments against Davis-Bacon. Although I believe that the argument that unions are responsible for the current problems is completely irrelevant, I would join an engineering union to collectively bargain for wages and benefits if I could.

The citizens of the United States need to demand better from our government, businesses, media and ourselves. If banding together in unions furthers that, then good.

 

[ctopher]

Rod,
It is nuts!
I bought mine 9.5 years ago for 229k, was appraised 2 years ago at 640k.
Probably in the low 400's now.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

 

[evelrod]

I don't like to beat the union drum in these forums, even though I exist, at least partially, on a union pension.
However, I will bore you with yet another anecdote...
In October of 1961, just married one month, I went to work at the Helium plant in Liberal, Kansas for MW Kellogg, for union wages. (short version, I only stayed six weeks) Just a few yeas ago, before his death, my brother in law worked for KBR (Kellogg now being a part of the non union conglomerate) for wages, adjusted for inflation, he made roughly only two thirds what my 61 wage was. He worked for KBR for YEARS!

Rod

 

[BigInch]

Zapster got it right.

the foxes were in charge of the hen house

Question is, who gave the foxes the keys to the chicken house ... and will we do it again?

If you were plowing a field, which would you rather use? Two strong oxen or 1024 chickens?" - Seymour Cray (1925-1996), father of supercomputing
***************

http://virtualpipeline.spaces.live.com/

 

[metengr]

......Is this financial crisis being talked about on TV for real? What do you guys think?

I believe the markets are reacting to emotion and no, I don't necessarily believe this is for real. As was said on more than one occasion, "this too shall pass". I believe we need to wait it out and let the weak banks fail and allow others to rise up to the occasion. This will settle out over time with no government intervention.

 

[stanier]

The housing market is encouraged to expand because it employs large numbers of people. The downside apart from the current difficulties is that every house built in USA or Australia etc becomes filled with imported products, particularly electrical goods. Anything that is manufactured is imported. The result:- votes for the politicians and a trade deficit in the trillions of dollars.

If you run your house based upon the USA financial principals you will soon end up in the poor house. You cannot spend what you dont have the ability to repay. If you buy from overseas it is paying someone else's wages and their taxes go to their government not yours. Also the unemployed take a share of your taxes to live.

When people realise that happiness is based on what you do not need rather than the material goods you have to have the economy will return to some stability.