On Mon, 03 Sep 2012 08:10:39 -0400, Ed Pawlowski wrote:

On Mon, 3 Sep 2012 05:38:52 -0500, "HeyBub"
wrote:

Han wrote:

Uh, the "Bush economy" was splendid. Unemployment less than 5%, no
inflation, 24 consecutive quarters of solid economic growth, DJIA
above 12,000, and so on.

All this in spite of 9/11, Katrina, and two wars.

Then the Democrats took over Congress in 2006 and everything fell
into the ditch.

It's called a bubble. Then the chickens came home to roost. Things
will get better after the elections, guaranteed.

I call it a good economy.


Parts of it was good economy. Housing prices became plain silly
though as almost everyone qualified for a mortgage.

If you look at the ratio of wages to a house, they stayed the same for
a long time. Pick a typical middle class income for a policeman,
carpenter, teacher, whatever. As wages went up, the price of a
particular house was about 3X the annual wage. Suddenly, the selling
price for that same house became 4X or more.

The reason was, anyone could get a mortgage and buy a house with
little down payment and affordable monthly payments for the first five
years. Oh ****, now I have to pay the real cost? I can't afford
that! The mortgage broker got his commission though.


And to add to that, as long as the prices went up, whether you screwed
up or not, no one cared in the industry. They knew what's going on.

It's only when prices go down, then the finger pointing begins.

"Doug" wrote in
:

On Mon, 03 Sep 2012 08:10:39 -0400, Ed Pawlowski wrote:

On Mon, 3 Sep 2012 05:38:52 -0500, "HeyBub"
wrote:

Han wrote:

Uh, the "Bush economy" was splendid. Unemployment less than 5%, no
inflation, 24 consecutive quarters of solid economic growth, DJIA
above 12,000, and so on.

All this in spite of 9/11, Katrina, and two wars.

Then the Democrats took over Congress in 2006 and everything fell
into the ditch.

It's called a bubble. Then the chickens came home to roost. Things
will get better after the elections, guaranteed.

I call it a good economy.


Parts of it was good economy. Housing prices became plain silly
though as almost everyone qualified for a mortgage.

If you look at the ratio of wages to a house, they stayed the same for
a long time. Pick a typical middle class income for a policeman,
carpenter, teacher, whatever. As wages went up, the price of a
particular house was about 3X the annual wage. Suddenly, the selling
price for that same house became 4X or more.

The reason was, anyone could get a mortgage and buy a house with
little down payment and affordable monthly payments for the first five
years. Oh ****, now I have to pay the real cost? I can't afford
that! The mortgage broker got his commission though.


And to add to that, as long as the prices went up, whether you screwed
up or not, no one cared in the industry. They knew what's going on.

It's only when prices go down, then the finger pointing begins.

Well, the problems were manyfold, but yes as long as a Ponzi scheme or a
bubble in the economy keeps getting more money in than out, nothing is
wrong. It only goes wrong when that's not so anymore, and both Ponzi
schemes and bubbles will (eventually) burst.

So what were the problems?
Overemphasizing that people who didn't qualify using the old rules (20%
down, income to cover costs of owneship, some proof of responsible
finances), should also be able to purchase. Now, perhaps some of those
should or shouldn't. Artists, self-employed, etc may have difficulty to
qualify. I don't know what the exact rules should be, what % of total
mortgages a bank should devote to them, etc. It is noteworthy that some
states had rules that prevented some of this, I think TX was one.

In an environment of flippers, appraisers were easily fooled/conspired to
overestimate values and hence mortgage values. Balloon mortgages and
teaser rates are especially dangerous. Bankers should be rewarded by the
quality of the mortgages, not the number or amounts.

Securitization of mortgages was done haphazardly to say the least, and
there were instances of willfull fraud (top emphasize the criminality).

SO what is the current news item that banks are giving auto loans to
subprime customers? The next bubblet?

--
Best regards
Han
email address is invalid

On Sep 4, 12:03*pm, Han wrote:
"Doug" wrote :





On Mon, 03 Sep 2012 08:10:39 -0400, Ed Pawlowski wrote:

On Mon, 3 Sep 2012 05:38:52 -0500, "HeyBub"
wrote:

Han wrote:

Uh, the "Bush economy" was splendid. Unemployment less than 5%, no
inflation, 24 consecutive quarters of solid economic growth, DJIA
above 12,000, and so on.

All this in spite of 9/11, Katrina, and two wars.

Then the Democrats took over Congress in 2006 and everything fell
into the ditch.

It's called a bubble. *Then the chickens came home to roost. *Things
will get better after the elections, guaranteed.

I call it a good economy.

Parts of it was good economy. *Housing prices became plain silly
though as almost everyone qualified for a mortgage.

If you look at the ratio of wages to a house, they stayed the same for
a long time. *Pick a typical middle class income for a policeman,
carpenter, teacher, whatever. *As wages went up, the price of a
particular house was about 3X the annual wage. *Suddenly, the selling
price for that same house became 4X or more.

The reason was, anyone could get a mortgage and buy a house with
little down payment and affordable monthly payments for the first five
years. *Oh ****, now I have to pay the real cost? *I can't afford
that! *The mortgage broker got his commission though.

And to add to that, as long as the prices went up, whether you screwed
up or not, no one cared in the industry. *They knew what's going on.

It's only when prices go down, then the finger pointing begins.

Well, the problems were manyfold, but yes as long as a Ponzi scheme or a
bubble in the economy keeps getting more money in than out, nothing is
wrong. *It only goes wrong when that's not so anymore, and both Ponzi
schemes and bubbles will (eventually) burst.

So what were the problems?
Overemphasizing that people who didn't qualify using the old rules (20%
down,
income to cover costs of owneship, some proof of responsible
finances), should also be able to purchase.

Buying a house with less than 20% down isn't something new.
We had 10% down mortgages, for example, going back at least
to the 80's. I do think it's fair to say that the percentage of
mortgages
issued with less than 20% down, with no income verification, with
low initial rates, etc had been rising for a long time.

As for overemphasizing that people who can't meet more
strict standards should get homes, who do you think is
to blame for that? If anything, don't the Democrats say
everyone is entitled to what they want, be it contraceptives,
healthcare or a house, and the govt not only should not
stand in the way, but has to make it all possible?

With the CRA, banks were being forced to make loans
in minority neighborhoods and if they didn't they were
supposed to be redlining racists, subject to stiff penalties.




*Now, perhaps some of those
should or shouldn't. *Artists, self-employed, etc may have difficulty to
qualify. *I don't know what the exact rules should be, what % of total
mortgages a bank should devote to them, etc. *It is noteworthy that some
states had rules that prevented some of this, I think TX was one.

Part of the problem is that you shouldn't have to know. The bank
or lender should know that. It's part of their business. But, we
also
have govt creations, ie Fannie and Freddie, where lenders can make
the loans and then pass them off to them. Even worse, Fannie and
Freddie in turn bundle those loans and some investor in Oshkosh or
Germany winds up owning them. They know nothing about the house
in Las Vegas, or what it's worth. And wall street came up with all
kinds of new derivatives to make that process possible. Derivatives
that it turns out were so complicated, few really understood them or
the risks. It's a different environment from 1950 when you went and
got a mortgage from the local bank and they continued to hold it.




In an environment of flippers, appraisers were easily fooled/conspired to
overestimate values and hence mortgage values.

No question there were some appraisers out there that
were grossly inflating appraisals. But the bigger part of it is
that the bubble justifies the appraisals. Going back to Las Vegas,
it's not the appraisers job to say "Look, $750K for that 4 bedroom
house seems high to me because it was only worth half that
10 years ago and you can keep building houses here in the
desert forever." It was his job to look at comparable sales
and since other houses were selling for around that, then
he appraises it at $750K.


*Balloon mortgages and
teaser rates are especially dangerous.

They can be, but they also serve a purpose. Say a person has
a job with a company and they know they will be in their present
location for only 5 years, then moving or maybe retiring. They have
good credit, other assets, etc. So,
if they can get a mortgage with a low rate that lasts for that
period, it's a good thing for them. On the other hand, if you're
already on shakey financial ground and get a mortgage where
you can just barely keep up, that's clearly a bad thing.



*Bankers should be rewarded by the
quality of the mortgages, not the number or amounts.

It would seem to me they should be rewareded for both.
A banker isn't much good if they sit on their ass and
issue 10 sound mortgages. You want the banker that
can issue 500 sound mortgages.



Securitization of mortgages was done haphazardly to say the least, and
there were instances of willfull fraud (top emphasize the criminality).

SO what is the current news item that banks are giving auto loans to
subprime customers? *The next bubblet?

--


That's the problem. There is always going to be the next bubble.
It's a product of free economies going back centuries. And a
related problem is that those in favor of big govt think that just
one more set of regulations is going to prevent it. We had
regulations and regulators in place. Look at the Fed. They got
off without any blame and it's their job to regulate interest rates
so that they don't create inflation or wreck the economy.
Their focus was on overall inflation. That remained very low,
so they kept interest rates very low. They ignored the housing
bubble that was feeding. They also ignored the stock market
bubble of 1999. We had Greenspan make a speech about
irrational exuberance, but they did nothing. They could have
raised the margin requirments.. And we were just lucky that
bubble didn't bring everything down with it when it collapsed.

So, do we need a lot of new regulations? Or do we just
need to give a kick in the ass to the ones we already have?

wrote:

As for overemphasizing that people who can't meet more
strict standards should get homes, who do you think is
to blame for that? If anything, don't the Democrats say
everyone is entitled to what they want, be it contraceptives,
healthcare or a house, and the govt not only should not
stand in the way, but has to make it all possible?

With the CRA, banks were being forced to make loans
in minority neighborhoods and if they didn't they were
supposed to be redlining racists, subject to stiff penalties.

Yep. Drive down a street in the "disadvantaged" neighborhood of your town
(doors locked). On any given block, you'll see a pawn shop, a pay-day loan
office, a bodega, and a Bank of American branch.

Does anyone actually believe BOA or Wells Fargo or Chase put a branch where
the only passer-bys were hookers or crack dealers because it was profitable
to do so? Isn't it more likely that they were "encouraged" by the FDIC, the
Comptroller of the Currency, or some other government factotum?

" wrote in
:

On Sep 4, 12:03*pm, Han wrote:
"Doug" wrote
innews:458c4891jtq7b61l3gnhos947o9c
:





On Mon, 03 Sep 2012 08:10:39 -0400, Ed Pawlowski
wrote:

On Mon, 3 Sep 2012 05:38:52 -0500, "HeyBub"
wrote:

Han wrote:

Uh, the "Bush economy" was splendid. Unemployment less than 5%,
no inflation, 24 consecutive quarters of solid economic growth,
DJIA above 12,000, and so on.

All this in spite of 9/11, Katrina, and two wars.

Then the Democrats took over Congress in 2006 and everything
fell into the ditch.

It's called a bubble. *Then the chickens came home to roost. *Th
ings
will get better after the elections, guaranteed.

I call it a good economy.

Parts of it was good economy. *Housing prices became plain silly
though as almost everyone qualified for a mortgage.

If you look at the ratio of wages to a house, they stayed the same
for a long time. *Pick a typical middle class income for a
policeman, carpenter, teacher, whatever. *As wages went up, the
price of a particular house was about 3X the annual wage.
*Suddenly, the selling price for that same house became 4X or more.

The reason was, anyone could get a mortgage and buy a house with
little down payment and affordable monthly payments for the first
five years. *Oh ****, now I have to pay the real cost? *I can't
afford that! *The mortgage broker got his commission though.

And to add to that, as long as the prices went up, whether you
screwed up or not, no one cared in the industry. *They knew what's
going on.

It's only when prices go down, then the finger pointing begins.

Well, the problems were manyfold, but yes as long as a Ponzi scheme
or a bubble in the economy keeps getting more money in than out,
nothing is wrong. *It only goes wrong when that's not so anymore, and
both Ponzi schemes and bubbles will (eventually) burst.

So what were the problems?
Overemphasizing that people who didn't qualify using the old rules
(20% down,
income to cover costs of owneship, some proof of responsible
finances), should also be able to purchase.

Buying a house with less than 20% down isn't something new.
We had 10% down mortgages, for example, going back at least
to the 80's. I do think it's fair to say that the percentage of
mortgages
issued with less than 20% down, with no income verification, with
low initial rates, etc had been rising for a long time.

As for overemphasizing that people who can't meet more
strict standards should get homes, who do you think is
to blame for that? If anything, don't the Democrats say
everyone is entitled to what they want, be it contraceptives,
healthcare or a house, and the govt not only should not
stand in the way, but has to make it all possible?

With the CRA, banks were being forced to make loans
in minority neighborhoods and if they didn't they were
supposed to be redlining racists, subject to stiff penalties.




*Now, perhaps some of those
should or shouldn't. *Artists, self-employed, etc may have difficulty
t
o
qualify. *I don't know what the exact rules should be, what % of
total mortgages a bank should devote to them, etc. *It is noteworthy
that som
e
states had rules that prevented some of this, I think TX was one.

Part of the problem is that you shouldn't have to know. The bank
or lender should know that. It's part of their business. But, we
also
have govt creations, ie Fannie and Freddie, where lenders can make
the loans and then pass them off to them. Even worse, Fannie and
Freddie in turn bundle those loans and some investor in Oshkosh or
Germany winds up owning them. They know nothing about the house
in Las Vegas, or what it's worth. And wall street came up with all
kinds of new derivatives to make that process possible. Derivatives
that it turns out were so complicated, few really understood them or
the risks. It's a different environment from 1950 when you went and
got a mortgage from the local bank and they continued to hold it.




In an environment of flippers, appraisers were easily
fooled/conspired to overestimate values and hence mortgage values.

No question there were some appraisers out there that
were grossly inflating appraisals. But the bigger part of it is
that the bubble justifies the appraisals. Going back to Las Vegas,
it's not the appraisers job to say "Look, $750K for that 4 bedroom
house seems high to me because it was only worth half that
10 years ago and you can keep building houses here in the
desert forever." It was his job to look at comparable sales
and since other houses were selling for around that, then
he appraises it at $750K.


*Balloon mortgages and
teaser rates are especially dangerous.

They can be, but they also serve a purpose. Say a person has
a job with a company and they know they will be in their present
location for only 5 years, then moving or maybe retiring. They have
good credit, other assets, etc. So,
if they can get a mortgage with a low rate that lasts for that
period, it's a good thing for them. On the other hand, if you're
already on shakey financial ground and get a mortgage where
you can just barely keep up, that's clearly a bad thing.



*Bankers should be rewarded by the
quality of the mortgages, not the number or amounts.

It would seem to me they should be rewareded for both.
A banker isn't much good if they sit on their ass and
issue 10 sound mortgages. You want the banker that
can issue 500 sound mortgages.



Securitization of mortgages was done haphazardly to say the least,
and there were instances of willfull fraud (top emphasize the
criminality).

SO what is the current news item that banks are giving auto loans to
subprime customers? *The next bubblet?

--


That's the problem. There is always going to be the next bubble.
It's a product of free economies going back centuries. And a
related problem is that those in favor of big govt think that just
one more set of regulations is going to prevent it. We had
regulations and regulators in place. Look at the Fed. They got
off without any blame and it's their job to regulate interest rates
so that they don't create inflation or wreck the economy.
Their focus was on overall inflation. That remained very low,
so they kept interest rates very low. They ignored the housing
bubble that was feeding. They also ignored the stock market
bubble of 1999. We had Greenspan make a speech about
irrational exuberance, but they did nothing. They could have
raised the margin requirments.. And we were just lucky that
bubble didn't bring everything down with it when it collapsed.

So, do we need a lot of new regulations? Or do we just
need to give a kick in the ass to the ones we already have?

I read what you wrote, and agree!! As for whether we need "new"
regulations? Perhaps not, but we need to enforce the letter as well as
the spirit of the law. There shouldn't be redlining, but then, there
shouldn't be generalizations either. However, the generalizations often
were generated on a hint or basis of fact. Use your own preferred
characterizations of Dems and Reps. GRIN!!

--
Best regards
Han
email address is invalid