The U.S. Economy (I need to rant!)

I can see why you are bitter given your situation TJ, but why take it out on somebody you don't even know?

 

:amen:
How could someone not know they had an ARM??? Read any contract before you sign it, that's common sense 101. To make a purchase like that and not know what the details are is unbelieveable. I don't think that's what happened though. People wanted to buy a great big nice house to show off to their friends and family. They buried their heads in the sand when it came to understanding the details of the mortgage, etc... Now they are looking for someone to blame. The fact that the government wants to use taxpayer money to help these dum dums makes me pissed.

 

Agreed. The only part of me that wants the government to do something is the part that says "let's keep this mass of fools from messing up the rest of the economy with their stupid decisions". That and I do have sympathy for a few people who made good-faithed decisions and got ripped off by the unscrupulous. For instance, I read of a case locally where the mortgage broker forged documents in the buyers name, committing the buyer to a higher rate than what the buyer had signed for. Folks like that should be thrown in jail of course.

 

But that person will get a bonus from the lending institution instead, because they are the only ones getting the bailout so far, banks and lending institutions, and stock investors, they get the bailout also, not much in the way of lower interest is making its way to mortgage borrowers. Wonder why.

Probably because the only ones the government cares about, are the CEO's and boards of the banks and lending institutions.

April 2 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke acknowledged for the first time that a U.S. recession is possible because homebuilding, employment and consumer spending will deteriorate.

``It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly,'' Bernanke told Congress's Joint Economic Committee today. He also said the Fed's emergency loan to Bear Stearns Cos. followed a March 13 warning by the firm that it would have to file for bankruptcy the next day.

Bernanke, making his first extensive public comments since the Fed's decisions two weeks ago to back the takeover of Bear Stearns and lower interest rates by 0.75 percentage point, is trying to fend off criticism of the deal while struggling to prevent a deeper economic slump. He said he thought ``long and hard'' about the decision, and doesn't anticipate the need for a similar rescue of another company.

While the Fed expects the economy to return to its long- term growth pace in 2009, ``in light of the recent turbulence in financial markets, the uncertainty attending this forecast is quite high and the risks remain to the downside,'' he said.

Treasury notes and stocks were little changed after Bernanke's remarks. The benchmark 10-year note yielded 3.59 percent at 12:26 p.m. in New York.

Bleaker Outlook

``This is a much more pessimistic assessment of the economy than what the Fed had three months ago or six months ago,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, who previously worked as a senior economist in Congress. ``Certainly, the Fed and the capital markets have been surprised the economy has slowed so quickly.''

The Fed, in an emergency decision on Sunday, March 16, voted to authorize a loan against $29 billion of Bear Stearns assets, including mortgage-backed securities, so JPMorgan Chase & Co. would buy the company.

Bernanke, questioned by lawmakers about putting taxpayer money at risk, expressed confidence the Fed won't lose money on the Bear Stearns deal. The Fed last week said JPMorgan will shoulder the first $1 billion of any losses.

``I feel reasonably confident that we'll be able to recover all the principal and indeed some interest, and there is some chance of even upside beyond that,'' Bernanke said.

Bear Collateral

The Fed chief also said the central bank's investment adviser, BlackRock Inc., has gone ``through those assets, and they are confident, or at least reasonably confident, that we will be able to recover the full amount if we dispose of these assets on a measured basis, rather than to sell them all at once.''

The central bank also expanded its powers last month by opening up lending directly to Wall Street investment banks. In addition, the Fed cut the interest rate on loans to banks, and now securities firms, by a quarter point.

Two days later, the Federal Open Market Committee cut the main lending rate to 2.25 percent and said the ``outlook for economic activity has weakened further.'' Officials also showed renewed concern about inflation, making a smaller reduction than traders anticipated. Two policy makers dissented in favor of ``less aggressive action.''

The Fed agreed to the emergency Bear Stearns loan to ``prevent a disorderly failure'' of the company and the ``unpredictable but likely severe consequences of such a failure for market functioning and the broader economy,'' Bernanke said.

Senate Probes

The Senate's banking and finance committees have started separate inquiries into the transaction, raising questions about the role of the regulators in facilitating it.

``With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions'' and ``could have severely shaken confidence,'' the Fed chief said.

Bernanke said that the U.S. economy is ``going through a very difficult period.''

The U.S. economy grew at an annual pace of 0.6 percent from October to December. Growth probably slowed to a 0.2 percent annual rate in the first quarter, according to the median estimate of analysts surveyed by Bloomberg News.

``Monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year,'' Bernanke said. Policy makers expect that the rate cuts and financial-market actions this year ``will help to promote growth over time and to mitigate the risks to economic activity.''

Fed Statement

He didn't repeat the expectation of ``moderate growth'' from the FOMC's March 18 statement.

Traders expect the Fed to lower the overnight interbank lending rate by a quarter-point at the next FOMC meeting April 29-30, based on futures prices.

Separately today, the International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression. Also, orders to U.S. factories fell more than forecast in February, a Commerce Department report showed.

Treasury Secretary Henry Paulson told Bloomberg Television in an interview from Beijing that the IMF numbers appear ``overblown to me.'' He indicated a willingness to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.

Inflation `Concern'

Bernanke said that inflation ``has also been a source of concern,'' with higher commodity prices and the weaker dollar. At the same time, he said the Fed expects inflation to ``moderate in coming quarters,'' echoing the FOMC statement. A ``leveling out'' of commodity prices and slower global growth will help, Bernanke said.

The Fed's preferred inflation gauge, which excludes food and energy costs, has increased at least 2 percent from the year earlier, the upper end of officials' long-term projections, for five straight months through February. Bernanke said the rate ``has edged down recently.''

Senator Charles Schumer, the New York Democrat who chairs the House-Senate panel, said today that the Fed's actions on Bear Stearns ``provided some much-needed breathing room to the financial markets.''

``But there are many legitimate, looming, and unanswered questions about what happened both before and after the Bear Stearns action,'' Schumer said.

 

I have been lied to by so many in my situation, it's amazing I can be civil at all. But point of fact, I do believe that there are more, let's say, 'less then honest' real estate agents out there, at least there was in 2005 and earlier, that persuaded many buyers to buy, when they should not have.

They lined up buyers, with less then honest lenders, who got people with crappy credit ratings 100% loans, or with very little down, who in the past, would have been rejected. I would say that most of those people were honest workers, who got sold a bill of goods.

And I think that real estate agents who participated in this fiasco, should be held accountable as well.

 

How about Nafta? Ronnie wasn't for the working middle class folks.

 

When you buy stock as an investment in the productive capacity of the economy, you are saving for the future.

When you buy stock in the hopes of making a quick profit on the short-term fluctuations of the market, you are gambling.

When you buy a house on a fixed-rate mortgage that you can afford to pay, based on your income and your other expenses, you are saving equity and you are preparing for the time in your retirement when you will have less income, but if your house is paid off you will need less income.

When you buy a house on a mortgage you cannot pay, or with the intention of selling it in the short term because you believe that "real estate always goes up," then you are gambling.

Gambling is harmful to the economy. But the regulatory difficulty is that you want people to be able to buy or sell a home, and you want people to be able to buy or sell stock. The trick is to regulate in such a manner that you prevent gambling ("speculation") while still allowing freedom of legitimate commerce.

 

It is of course possible that Real Estate agents also mis-judged the market much as did many home buyers. And of course an awful lot of buyers heard what they wanted to hear and didn't do their due diligence. Had they gambled and won, they'd be moaning and groaning about all of the cap gain taxes they were having to pay upon selling.

Also, don't forget that just a few short years ago, many were decrying the lack of loans for those with poor credit or low incomes (particularly with respect to minorities). Well, the market responded to demand for these loan vehicles. Social engineering that was not founded on solid economics. Not prudent for lenders, not prudent for borrowers. Although I agree it generally worked out quite well for many home sellers, RE agents, and mortgage brokers.

Regardless, since you are feeling ripped off, you will want to follow this case.

 

Well stated. BTW, your first comment about buying a home that one can afford reminds me of MarinJohn's unbelievable story about how he got into a house. It wasn't through some shaky ARM loan product and no money down. From what I recall, he worked his tail off for years and scrimped and saved for a proper downpayment before buying. I don't want to speak for him, but I suspect he is quite dismayed at the current crop ill-qualified buyers who are now begging Uncle Sam for help.

 

My first condo I bought, was $170,000 that I paid CASH for, after saving for over twenty years.

I did sell that, and had the profit to put down $75,000 on the house that I am know looking to lose money on, so I can feel his pain.

 

I read your link. I don't find it all surprising that it's a RE/MAX agent that is being sued. I think they must train them to be particularly weaselly. I know mine was.

I am being advised by my lawyer, that once my house sells, if it sells, I have a legitimate lawsuit of a similar manner, that I should win. Although my lawsuit also involves shady loan officers and lending institutions.

 

You will end up having your peace ship blown up by the French, is that really what you want?

 

I'd love to have a case like that. If the documents were forged the owners will do real well in the suit.

 

If you buy a piece of art because you love it and enjoy looking at it, and you pay a price you can afford, its market value is of little concern. That's how I buy art. Of course, I'd feel bad if I found out I could have gotten it for less (some exceptions apply*) but what matters is that I can afford it and I enjoy owning it.

But if you buy a work of art that you cannot afford, on the hope that it will increase in value and you can sell it before the payment is due, then you are gambling on money you don't have, and you are taking the risk that you'll lose your shirt if its value falls.

Similarly, if you buy a house you can afford, with money you have, and it's a house you like in a neighborhood you enjoy living in, then the market value of the house is of minor importance. Of course you'd feel bad if the market falls and you know that 6 months later you could have gotten it for less, but still you are living in a place you like.

But if you buy a house you cannot afford, on the assumption that the value will go up forever and you will never have to pay it off; or that you'll be able to sell it at a profit without ever having paid it off, then you are gambling on money you don't have, and you are taking the risk that you'll lose your shirt if its value falls.

The people who are to be pitied are those who were deceived by agents or lenders. Mortgage contracts can be so full of legalese that an ordinary person cannot hope to understand them. If the buyer believes that he has a fixed rate and that he can afford the payments, but he was lied to, and then it turns out that he really had an ARM or a balloon payment, then there was fraud and he should be able to sue the dishonest agent.

FWIW, I bought my house through a real estate agent who represented me, and who did an excellent job, showing me houses that met my criteria, and after the first batch, when I revised my criteria, he showed me others that matched my new criteria. Then he helped me through the actual buying process. If anybody is looking to buy a home in or near Spokane, PM me and I'll give you his name. I paid a price I could afford, so if the value collapses I still have my house to live in.

* Exception to the market-value rule: Some artists and artisans sell their work at a price which represents the value of their labor, rather than "what the market will bear," and in such cases I never haggle over price. I pay the price if I like the object, even if it's clear they would sell for less.

 

The US trade deficit is approaching a trillion $ a year. That is one of the largest reasons we have a sour economy. A scary website: Trade Ticker - The Web's only up-to-the-second counter for the U.S. Trade Deficit. Guess which company contributes more to that trade deficit than any other? Yes the one that claims to be moving you forward!

 

I haven't found it yet, but I heard that congress either passed legislation or pressured lenders to relax their credit requirements? Everytime they try to "help", it backfires.

 

Well its not Toyota's fault GM, Ford and Chrysler couldn't see the future, GM actually had the original patent on Hybrids, but it would have caused the CEO to not have Gold fixtures in his mansion.

The entire US Automotive industry has always had the upper hand, but always gave it up for the short term profit, with top management only concerned with their enormous salary and stock options. There was never a concern for the long term in American Auto Corporations plans.

American auto manufacturing turned down Dr. Deming, an American, to learn the right way to manufacture and to pay attention to the principles of statistical quality control, something that Toyota took to heart.

One of the biggest differences is that Toyota gives back to this country, China will not, they only take, and them gaining more US debt is not good for the country.

 

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I KNEW that that would be a bit over your heads... but then again who reads nowadays, much less who thinks with their own heads nowadays?

most of the people are unable to think for themselves (as stated by one of those globalists), all they do is regurgitate latest propaganda download from their television set, so it is not surprising that if it wasn't on TV then it must be a "conspiracy".

unfortuantelly, world is ran by conspiracies, and it was that way from time immemorial.
just look back in history and then come to present moment and tell me if that is not so.



i consider my post as a litmus test, to see if any of the people here (who may not be aware of bigger game) are even aware that what i wrote is all documented in gory detail and very often by those same conspirators, be it Bushes, or Chevron execs.
Yep, they are conspirators who are smart us over royally, destroying America on purpose while most of the "subjects" are telling those few aware of how game is played to "drink coolaid".

what a great advice!

right....the price of oil is not a conspiracy, nor is withholding the technology like E95 battery that can help liberate us from that drug called "oil".



but to understand this it would actually require reading a book 'occasionally' doing your own research and then thinking about it, on your own. then, you would know that
scarcity = dependency, dependency = control

if a (fake) scarcity = oil then we can see that oil is used as a control tool.
but hey, that is just a "conspiracy theory" as your TV channels would say.
<eyeballs rolling>

 

Not only am I dissapointed that I took the hard road to home ownership but sorely dismayed that I did not parlay that house into one during the early 2000s which I could not afford since the home I live in is pretty small (tho affordable). If I'd known that someone would be there (unlike my family) to bail me out of a stupid decision I would have joined the stupids.

During the buying and refinancing boom 5 years ago I dissuaded many buyers from taking ARMS, and I even lost clients who just went to someone else willing to 'make this perfect house affordable for me'. In my area of the country prices have stabilized but not dropped too much, but those ARMs are beginning to adjust so not only are people trying to refinance but they ARE TAKING CASH OUT during the refinance! So, they escaped one bullet by happening to buy in an area where they are not (yet) upside down on their obligation, but they are soon to take another bullet by taking cash out. I can't even fathom what these people are thinking. Now all this begs the question: 'who is the fool'? those who played by the rules or those who went against all sound advice and will probably get bailed out by junior?