Economy still deep in the woods

We are still deep in the woods with the economy.  We have gone beyond what would be considered normal or even a long recession and unemployment is still near 10%.  The government is still trying to spin the reality into a yarn that says that things are turning around.  They statistics the government using are manipulated to push the agenda of the White House and administration that thinks class room economic theory is similar to the real world, but that is for another story. 

Our economy is relying on unemployment checks and aid for food to keep money circulating.   We have turned over control of the economy to the CEO's that put us in this structured depression.  Hopefully the recent cases that ruled in favor of the plaintiff and against the big banks will be a catalyst for real structural change to the banking system.  Kemp vs Countrywide and the recent Wells Fargo case  could set precedent for action against the too big to fail banks.

It is possible that the only way the government will step up to the plate and demand accountability from the banks is if judges make the effort understand the Pooling Service Agreements for the Residential Mortgage Backed Securities.  They will then easily see how the bankers have torn the economy to shreds through fraud and deception.




Related Stories

Dylan Ratigan making case against the banks on his afternoon show. 

Wells Fargo case

Las Vegas: Underwater in the Desert, real estate is the anchor

Under water in the desert.  Sounds like an impossible event at first but there is always a mirage to keep us going until we find that inevitable oasis.  But the Las Vegas real estate market is now threatening to be drown in the tidal wave that might turn Vegas into another Atlantis.
http://www.lasvegassun.com/news/2010/nov/11/report-80-percent-las-vegas-homeowners-underwater-/


The cycle of declining home values (click here for full story), continued foreclosures, and more declining prices has affected almost every one with a mortgage in the gambler's Mecca.  The Las Vegas Sun reported Thursday 80% of the mortgages in sin city are underwater.  What? We knew it was bad here but this is now getting to the absurd.  The possibility of an economic recovery here is nil if housing pricing continue to drop. 

The usual answer is "well they can't go much lower" but we were saying that two years ago.  The catastrophic loss to homeowners will have life time consequences.  One of the fastest ways to make people feel less wealthy is to tell them they own more on their mortgage then they will ever be able to get for their house.  This is certainly true for the next ten years in Las Vegas.  There will be no rebound to vault homes up 150 % in the next several years. 

If homes dropped 60 % as an example, a 1,000,000 home is now valued close to 400,000.  I know this is simple math but think about how it affects the psyche.  Your net worth has dropped 600,000.  Add the kicker that you are now responsible to pay that 800000 mortgage back in full plus interest to our friends at the bank and you have cocktail that will knock you off your feet.  If that belt doesn't knock you out, you will soon be crying when you consider a 100% appreciation in home prices is needed to just cover your note.  But if you really want to get back to even don't forget the extra 20 % -30% you still need to get back to the price back to what you paid. 

So the idea of having security in the form of a home; that would be your nest egg, your emergency equity fund, your retirement account and/or  your feel good reserve has done a disappearing act.  Gone with it, the only viable investment the little guy could use that was not already completed exploited by Wall Street and the investment bankers. 

Las Vegas is on the verge of completely sinking under the weight of the housing crisis.  There is no way to fuel a recovery when people have nooses around their necks in the from of an under water mortgage.

Charlie Rose - Bear Stearns / Bear Stearns continued / Robin Wright (March 17, 2008)

 Harry Reid could put his re election to good use and hold the big banks accountable instead of pandering to them so they will give more campaign money. 

The banks have been gifted billions of dollars when they were completely underwater.  Has it  helped the economy or helped individual home owners?  In spite of all the rhetoric being spewed by the banks and their schills in the government, the banks have helped themselves while suffering any consequences for their part in accepting property as collateral which 80% is now underwater.  If they want to play that game and hold everyone else accountable then there should have been no bailout.  There certainly should not be another one.


I hate to say it though but each month we drop further underwater, the banks balance sheets get worse.  There is no way they could be solvent if the 30% of their mortgages are worth more than the collateral.  Vegas has nearly trippled that number but the rest of the country could hit 30% underwater very soon, then watch for bailout number 2 and expect to see no relief for years when the banks refuse to use good business sense and negotiate principal write downs to bring mortgages more in line with current values.  This is the only chance we have to keep from going completely underwater in Las Vegas. 

Las Vegas Housing: 80% of mortgages underwater.  Las Vegas Sun

Unqualified borrowers: A cause for financial calamity? maybe not

This is a response I had to someone stating that it was unqualified buyers over the past 10 years that were now causing financial ruin around the world.

I think our meltdown is has more to do with the issues around cds and mbs markets then with the small percentage of unqualified buyers. They were plenty of well capitalized and well qualified buyers purchasing things over the past 10 years. The system itself should be able to handle a 3 or 4 % default rate without melting down the world economy in my opinion. I don't know how we can ever expect 0% default rate or function with a financial system that will start a complete meltdown with a 2 or 3 % default rate. I see so many other factors that have contributed to the meltdown on top of the unqualified borrowers and if the unqualified borrowers are the only issue addressed rather than creating a system that can deal with defaults, we will be in for long long recession. I agree with you that many people were pushed through that had no business getting a mortgage, some stories so ridiculous, but I also think we need to have a mortgage and lending system this is better able to handle a higher than average wave of default at any given time.

The demand is there because home owners are being fleeced...who wants mortgages for .25 cents on dollar

They are are being valued by the larger banks because they have already made money off the mortgage boom and wall street made their money by creating securities with our mortgages and in turn undercutting our assets. They are writing things down 75% but the banks will then be expected to collect 100% on these assets while the people on main street get shafted because the underlying value has been cut in half even though they have not profited like wall street or the banks. The banks and wall street peeps seem to think it is OK to make 3, 4 or 10 times profit from on the backs of American home owners while they get screwed into the ground because of banking greed and government failure to protect home owners from being hurt by the leveraged cdo's. We are all being used as profit centers and they have made money from the the loans on origination, then more profit selling mortgages as securities and now the fire sale buyers will get to make 300 and 400% profits on homeowners again because home owners have to pay the full value of their mortgage regardless of what caused the drop in prices. It is a load of crap and if one other person says people that bought things they couldn't afford are the cause of this problem I will jump through the TV and smack the crap out of them.