Hmm.  I can understand that there were definitely banks in the Depression that got swept up in the panic and would have been fine if all of their depositors hadn't descended upon them at once.  I'm wondering how relevant that is today, though.

 

My "main" bank, or at least the one into which my paycheck is directly deposited, is Huntington.  I already know it received TARP money.  So what?  The checking account is FDIC insured up to $100,000.  I regret to inform the Internet that I have considerably less than that in said account.  I also own some stock in Huntington Bancshares (HBAN).  I knew that it was a TARP recipient when I bought those shares back in March, because Huntington let it be known in a press release.

 

Is there anyone here who's really about to go withdraw all their money and put it in a mattress, or dump any financial shares they own, if they learn that their bank is/was a TARP or other bailout recipient?  Maybe I'm being unreasonably blase.

^I still keep most my money in the bank (which isn't much to say the least). I use a bailout bank, Fifth Third. But on top of this, I have a small amount of emergency cash. If sh!t goes to hell, you are insured by the FDIC for up to $100,000 (which to me seems like an unfathomable amount of savings), but who knows how long it'd take to actually get your money? a week? month? longer?

 

In an emergency, you need four things- a shotgun, a water filter, a small reserve of cash on hand, and sh!t to barter with (coffee, liquor, etc.). Thankfully, we're not at that level. The shotgun will get you dinner, a good water filter will make stream water drinkable, the cash can be used to purchase emergency items, and the barter items will have value regardless of what the dollar is worth.

 

Most folks keep emergency kit that includes cash/debit cards at home.  I know after 9-11 and the blackout I've got one for each house.

Wow.  My idea of an emergency kit is a flashlight, batteries, bottled water, preserved food, that kind of thing.  I'm more worried about temporary blackouts than a complete collapse of the banking system.  Also, if I were worried about civilizational collapse, I wouldn't be taking my money out to keep it in cash; I'd be getting a generator, guns, still more preserved food, a wood-burning stove, seeds, and a water purifier.  However, I think this is going very far afield from the subject ragerunner raised with that article: Who cares if the list of TARP recipients is revealed?  A lot of them are already known anyway, and I don't think the mere act of revealing the list would actually bring this civilizational collapse any closer (whether it's just around the corner or, as I suspect, an extremely remote possibility).

 

I'm speaking from the perspective of someone who's an investor with a decent portion of his portfolio in financial stocks (including Huntington and Key--and I'm still kicking myself for not loading up on Fifth Third, which has done far better over the past year than either of the other two ... you'd have quintupled up on it had you bought in March).  My thought is simply that the justification used to argue for the stay of the ruling--that the banks would suffer irreparable harm if their names were made public--doesn't really hold water if most financial-sector investors share my feeling on the matter.  I'm only one guy, though, so I figured I'd throw it out there for discussion.

FDIC insurance is on deposits of up to $250,000 until the end of 2009.

FDIC insurance is on deposits of up to $250,000 until the end of 2009.

 

... or until the FDIC runs out of money... another couple of weeks at the rate it's going (lol)

This thread's title asks for predictions of how long the current recession will last....

 

The Telegraph (UK newspaper) thinks the "Great Contraction" in the West could go on for 25 years.

 

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6110621/Our-quarter-century-penance-is-just-starting.html

 

from the article...

We know what caused this crisis. The West kept short-term interest rates too low for a quarter century, luring society into debt: and the East held down long-term rates by flooding bond markets as a side-effect of their mercantilist strategy (ie suppressing currencies to gain export share).

 

The outcome was over-investment, excess capacity, and too much debt among those supposed to buy the goods. Has any of this changed? No. Have we cleared the excess plant? No.

 

Jeff Wenniger from Harris Private Bank says an army of baby-boomers have seen their old age plans shattered by the housing bust. Their nightmare is here. They will have to spend less, and save more. "Generational destruction of a society's balance sheet down not rectify itself in a matter of months".

 

How about a quarter century?

This thread's title asks for predictions of how long the current recession will last....

 

The Telegraph (UK newspaper) thinks the "Great Contraction" in the West could go on for 25 years.

 

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6110621/Our-quarter-century-penance-is-just-starting.html

 

from the article...

We know what caused this crisis. The West kept short-term interest rates too low for a quarter century, luring society into debt: and the East held down long-term rates by flooding bond markets as a side-effect of their mercantilist strategy (ie suppressing currencies to gain export share).

 

The outcome was over-investment, excess capacity, and too much debt among those supposed to buy the goods. Has any of this changed? No. Have we cleared the excess plant? No.

 

Jeff Wenniger from Harris Private Bank says an army of baby-boomers have seen their old age plans shattered by the housing bust. Their nightmare is here. They will have to spend less, and save more. "Generational destruction of a society's balance sheet down not rectify itself in a matter of months".

 

How about a quarter century?

 

While I don't think our situation is identical to Japan, they are now in their second 'lost' decade financially and its starting to cause some major political movement. Of course their significant declining population is not helping their economic situation.

from the article...

 

the Atlanta Fed says the true rate of US unemployment is already 16pc (not 9.4pc), worse than early 1931 levels. Official youth unemployment is 34pc in Spain, 28pc in Latvia, 25pc in Italy, 24pc in Sweden, Hungary, and Greece.

 

That sounds like C-Dawg territory!  Look out for riots in the near future !!!!

Those are some truly frightening figures even if it turns out that the 16% figure here is an inapt comparison to 1931 because they were using the "softer" calculation method and still coming up with 16% (i.e., "true" unemployment then might have been 25%).  I don't know what the actual methodologies were then, but it doesn't matter.  There's only so far a jobless recovery can go, and this recovery itself may well not last long before inflation pressures set in.

When people are starving, they resort to violence. I have no idea what kind of safety net system exists in those countries, but those numbers are scary. That article from the Telegraph was amazing, brutally honest.

 

Perhaps.  It still bought into the Keynesian notion that you can borrow your way out of a recession, though, which seems to run counter to everything else you said in your post about us being an over-indebted society.

 

Personally, I'd be willing to kill both Reaganomics and Keynesianism in one fell swoop with a balanced budget amendment to the U.S. constitution.  It didn't fly the last time it was proposed (a generation ago), however, and I don't think too many people would be willing to endure the short-term pain it would mean, particularly if it were passed today.  Also, of course, Democrats would hate it because it would mean lower spending and Republicans would hate it because it would mean higher taxes.

I think this is nothing. In another 12 to 18 months this number is going to be really ugly. I know some people dealing with this part of the industry and one of them the other day said banks are actually giving a lot of commercial mortgage's extensions so they don't have to take these loses onto the books. But, he also said the banks can only keep putting off the inevitable for only so long. Think of it as a voluntary 'California' type foreclosure moratorium across the nation for commercial mortgages (and the foreclosure numbers still doubled). It doesn't take much of an imagination to drive around and see all the vacant office, retail, distribution and industrial space that is growing rapidly. That is why I am amazed that any market would break ground on new large space in these categories this year. They will only add to that markets vacancy woes in the next year or two.

 

Commercial Mortgage Defaults Jump for U.S. Banks (Update2)

By Hui-yong Yu

 

"Aug. 31 (Bloomberg) -- The default rate on commercial mortgages held by U.S. banks more than doubled in the second quarter from a year earlier amid falling rents and occupancies for malls, office buildings and warehouses.

 

Loans that were 90 days or more past due climbed to 2.88 percent of outstanding balances in the second quarter, from 1.18 percent a year earlier, according to New York-based property research firm Real Estate Econometrics LLC. Defaults increased from 2.25 percent in the first quarter.

 

“A delinquency may have resolved itself two years ago,” said Real Estate Econometrics President and Chief Economist Sam Chandan. “Today, even one missed payment may be more indicative of an underlying problem, so banks have to be very proactive in addressing the issue.”

 

Banks held $1.087 trillion of commercial property loans in the quarter, up from $1.077 trillion in the previous three months. That’s almost 15 percent of all loans and leases held by banks, Real Estate Econometrics said. Defaults are rising both for lenders who hold commercial mortgages and for bondholders in the $700 billion U.S. market for securities backed by commercial mortgages."

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9FRZ6ipJB8Y

 

That’s almost 15 percent of all loans and leases held by banks

 

Key statistic here. When this hits full force, it will sink a lot of banks and/or we'll keep bailiing them out until kingdom (or China) come. 15% is not small potatoes.

 

I am not sure the print presses have enough ink left in them to deal with this and the Prime residential loans and the auto industry and the ............

That’s almost 15 percent of all loans and leases held by banks

 

Key statistic here. When this hits full force, it will sink a lot of banks and/or we'll keep bailiing them out until kingdom (or China) come. I'm thinking we'll see more bailouts knowing the American way. 15% is not small potatoes.

 

That stat by itself is meaningless: it simply says that commercial real estate lending is 15% of banks' portfolios.  It doesn't say what portion of that is in default (or in a workout process) or will likely default over the next 12-18 months.  The missing stat is the critical one.

^If I'm not mistaken, it's expected to rise to around 4 or 5%, which is a gigantic jump from last year (and 2008 wasn't exactly sunshine and rainbows). While that may not sound like a lot, it's well into the tens of billions of dollars in the near term, enough to cause serious problems and lead to even more bailouts. And a lot of commercial loans are up for refinancing over the next couple of years. A good chunk of those could end up in default too. In the end, will the total dollar amount of commercial defaults be as bad as home defaults? Probably not (at least I hope not), but it will be sending a second blow to an economy that already received a death blow which led to tremendous bailouts and a redistribution of wealth/banking power. The hole will get deeper...

 

Hence why I say it's a bit naive to think things are going to get better for the average American anytime soon. I think we're really looking at 2011 or 2012 as the first signs of significant recovery. We'll have a quarter here or there of stagnation/minimal growth, but the overall tidal wave won't recede for a couple of years. Too much is already set in motion.

 

typical c-dawg rants don't make sense, but I must agree with some of what the toledo mud hen wrote.

Perhaps. It still bought into the Keynesian notion that you can borrow your way out of a recession, though, which seems to run counter to everything else you said in your post about us being an over-indebted society.

 

Personally, I'd be willing to kill both Reaganomics and Keynesianism in one fell swoop with a balanced budget amendment to the U.S. constitution. It didn't fly the last time it was proposed (a generation ago), however, and I don't think too many people would be willing to endure the short-term pain it would mean, particularly if it were passed today. Also, of course, Democrats would hate it because it would mean lower spending and Republicans would hate it because it would mean higher taxes.

 

Ohio has a balanced budget requirement in its constitution.  Frankly, I don't think that's working out too well for us right now.  The state is completely unable to help Ohioans in a time of need.

 

If the federal government was required to have a balanced budget, the increase in domestic spending by the government would not have been there to take up any of the slack in spending from consumers who are now paying off their debt (if not already bankrupt, foreclosed upon, or laid off).  Domestic government spending has softened the impact of the current recession and possibly kept us from falling directly into another Great Depression.  In the 1930s Great Depression, the stock market recovered in about seven years, but employment still hadn't recovered after 11 years when WWII started for the US.  That is surely more "short-term pain" than we need. 

 

Granted, over time a lot of debt can be a problem, but the projected deficits ($9 trillion over ten years?) are still a small part of our GDP, even in a down economy like this.  And how much of a problem is difficult to judge in the international economy of today.  If you were an exporting country with a lot of money to invest (say, China or Saudi Arabia), what other country looks like a good investment? -- as bad as things are now I think the US is still the place to be, and if that's true, inflation probably will remain low for quite a while. 

 

Sometimes government spending is necessary, and I believe that this is one of those times.  We ought to be spending it on domestic infrastructure, not foreign nation-building and bombing, so that when the economy recovers we will be even more competitive with the rest of the world.  Government by the people, FOR the people and of the people has a duty to provide for the health, safety, and welfare OF the people -- government spending in this situation is necessary.

 

I'm glad Ohio has a balanced budget amendment in our constitution, and it's serving us well by forcing Ohio legislators to live within their means when they otherwise would be strongly tempting to take the easy but irresponsible way out of running up the deficit.

 

It's impossible to prove a counterfactual, so we'll never know for sure what would have happened had the federal government not been so profligate over the past year.  I have deep, deep skepticism about the prophets who predicted doom if we didn't bury ourselves in debt.  Massive domestic spending kept the prices of distressed bank assets from falling to market-clearing levels, and put the government in the position of picking winners and losers: Lehman Brothers, WaMu, Nat City, etc. were allowed to fail; Citi, AIG, and others got enormous bailouts at taxpayer expense to stay alive.  I honestly don't see that the recession would have been any worse had Citi and AIG failed (and I say this as a Citi shareholder).  Prices would have fallen more, yes, but that is the way it should be.  Deflation in a recession isn't pleasant, but it's natural and part of the natural recovery process of the market.

 

And yes, $9 trillion is a heck of a lot even for us.  Combined with our existing debt, that will push us over 100% of GDP in debt, even using rosy growth figures.

 

Sometimes government spending is necessary, true.  (In fact, government spending is always necessary--the question is simply how much.)  However, it should be paid for with current revenue, not debt.  The ability to borrow lets Congress (or the Ohio government, if Ohio were to repeal its balanced budget provision) reap all the political rewards of increasing benefits (or not cutting them) now while deferring the decision of how to pay for them until later.

 

Debt is the cancer of empires.

I agree as well.  Way too much debt is being issued.  I also agree about the bank bailouts being of questionable utility.

Please correct me if I'm wrong, but I could have sworn that I read just yesterday that the bank bailout money was getting repaid with interest back to the government at a rate of 15%.  If that is the case, wasn't the bailout quite a good investment of public dollars in terms of economic stability and pure ROI?

Please correct me if I'm wrong, but I could have sworn that I read just yesterday that the bank bailout money was getting repaid with interest back to the government at a rate of 15%. If that is the case, wasn't the bailout quite a good investment of public dollars in terms of economic stability and pure ROI?

 

True to this point, but see the caveat in the last paragraph:

 

http://www.cbsnews.com/stories/2009/08/31/business/main5276208.shtml

 

The U.S. government has hauled in about $4 billion in profits from large banks that have repaid their obligations from last year's federal bailout, The New York Times reported Sunday.

 

Last September, Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressed congressional leaders for legislation authorizing a $700 billion financial bailout of some of the nation's largest financial institutions, which were in danger of collapsing. The bill was signed into law in October.

 

Critics of the bailout were concerned that the Treasury Department would never see a return on its investment. But the government has already claimed profits from eight of the biggest banks.

 

The Times cited government profits of $1.4 billion from Goldman Sachs, $1.3 billion from Morgan Stanley and $414 million from American Express. It also listed five other banks - Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T - that each returned profits between $100 million and $334 million.

 

The government has also collected about $35 million in profits from 14 smaller banks, the Times reported.

 

Overall, the government's return on investment amounts to a 15 percent annual profit.

 

But Federal investments in some other banks, including Citigroup and Bank of America, are still in question, and the government could still lose much of the money it spent to bail out insurance company American International Group, mortgage lenders Fannie Mae and Freddie Mac, and automakers General Motors and Chrysler.

 

Citi and AIG were huge.  Until we know how those turn out, even good news medium-large fish like American Express and U.S. Bancorp needs to be taken with a small ocean's worth of salt.  (I'll grant that Goldman and Morgan Stanley were bigger fish, though still not as big as Citi or AIG or BoA, and it's much better to be getting a profit from them than losing money.  Still.  Don't count any chickens yet.)

 

Note that I'm keeping this to the topic of your question (ROI on the bailouts), not my original point (the desirability of a balanced budget amendment).  TARP was only a part of the massive federal deficit this year, which is set to clock in at a whopping $1,800 billion.  TARP was $700 billion.

Please correct me if I'm wrong, but I could have sworn that I read just yesterday that the bank bailout money was getting repaid with interest back to the government at a rate of 15%. If that is the case, wasn't the bailout quite a good investment of public dollars in terms of economic stability and pure ROI?

 

True to this point, but see the caveat in the last paragraph:

 

http://www.cbsnews.com/stories/2009/08/31/business/main5276208.shtml

 

The U.S. government has hauled in about $4 billion in profits from large banks that have repaid their obligations from last year's federal bailout, The New York Times reported Sunday.

 

Last September, Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressed congressional leaders for legislation authorizing a $700 billion financial bailout of some of the nation's largest financial institutions, which were in danger of collapsing. The bill was signed into law in October.

 

Critics of the bailout were concerned that the Treasury Department would never see a return on its investment. But the government has already claimed profits from eight of the biggest banks.

 

The Times cited government profits of $1.4 billion from Goldman Sachs, $1.3 billion from Morgan Stanley and $414 million from American Express. It also listed five other banks - Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T - that each returned profits between $100 million and $334 million.

 

The government has also collected about $35 million in profits from 14 smaller banks, the Times reported.

 

Overall, the government's return on investment amounts to a 15 percent annual profit.

 

But Federal investments in some other banks, including Citigroup and Bank of America, are still in question, and the government could still lose much of the money it spent to bail out insurance company American International Group, mortgage lenders Fannie Mae and Freddie Mac, and automakers General Motors and Chrysler.

 

Citi and AIG were huge. Until we know how those turn out, even good news medium-large fish like American Express and U.S. Bancorp needs to be taken with a small ocean's worth of salt. (I'll grant that Goldman and Morgan Stanley were bigger fish, though still not as big as Citi or AIG or BoA, and it's much better to be getting a profit from them than losing money. Still. Don't count any chickens yet.)

 

Note that I'm keeping this to the topic of your question (ROI on the bailouts), not my original point (the desirability of a balanced budget amendment). TARP was only a part of the massive federal deficit this year, which is set to clock in at a whopping $1,800 billion. TARP was $700 billion.

 

From what I understand (I will do a little more research), they maybe paying back the TARP money, but they are not taking back onto their balance sheets all that worthless paper (loans) that the Feds took off their hands until an undisclosed future time. When they start taking that paper back than I will consider this a winning proposition.

466 total official stalled construction sites in nyc, eh?

 

check out 8 grand ones in manhattan below canal street:

 

 

 

Awaiting Megadollar Loans, Grand Plans Lie Fallow Downtown

 

By Carl Glassman

UPDATED Sep. 01

 

They should be rising now—shiny, majestic and ready to punch the sky. But behind the construction fences of Lower Manhattan, as around the city, luxurious condominiums and five-star hotels-to-be are no more than bare concrete foundations and dirt lots. As financing vaporized last fall, so too did the dreams of developers and schemes of famous architects—at least for now. According to the Department of Buildings, there are 446 stalled construction projects in the city, so many that the agency created a special stalled building task force to inspect dormant sites and make sure that they are safe. The DOB counts eight stalled sites below Canal Street. Not many, but several are massive in scope. The Trib peeked over the fences of six of those projects. Here’s what we could see.

 

http://www.tribecatrib.com/news/2009/august/305_arrested-developments.html

 

466 total official stalled construction sites in nyc, eh?

 

check out 8 grand ones in manhattan below canal street:

 

 

 

Awaiting Megadollar Loans, Grand Plans Lie Fallow Downtown

 

By Carl Glassman

UPDATED Sep. 01

 

They should be rising now—shiny, majestic and ready to punch the sky. But behind the construction fences of Lower Manhattan, as around the city, luxurious condominiums and five-star hotels-to-be are no more than bare concrete foundations and dirt lots. As financing vaporized last fall, so too did the dreams of developers and schemes of famous architects—at least for now. According to the Department of Buildings, there are 446 stalled construction projects in the city, so many that the agency created a special stalled building task force to inspect dormant sites and make sure that they are safe. The DOB counts eight stalled sites below Canal Street. Not many, but several are massive in scope. The Trib peeked over the fences of six of those projects. Here’s what we could see.

 

http://www.tribecatrib.com/news/2009/august/305_arrested-developments.html

 

 

So that is whats going on next to 57 READE STREET.  I took photos of the building next to it.  Who knew??

right on..

At some schools, budget cuts put the kibosh on sports

 

By Marlen Garcia, USA TODAY

 

Instead of gearing up to run cross country for Grove City High School in Ohio, Andy Bennett is training for a marathon.

It will give the 16-year-old some consolation because sports programs and clubs at his school have been shut down. An hour after the last bell each afternoon, it's lights out at the school.

 

Bennett and his classmates won't have homecoming, prom or a student government — activities that, like sports, are fixtures in American high schools but no longer exist at Grove City because of a financial crisis.

 

That's the plight of all students who attend South-Western City Schools, which serves part of Columbus and nearby towns and is Ohio's sixth-largest school district. The district has been in dire financial straits for years and is being squeezed further by the economic downturn. By canceling activities, the district cut $2.5 million in expenses, district spokeswoman Sandy Nekoloff says.

 

...

 

Contributing: Geoff Kimmerly of the Lansing (Mich.) State Journal; Chris Gabel of the Reno Gazette-Journal

 

http://www.usatoday.com/sports/preps/2009-09-02-budget_sports_cuts_N.htm

Grove City really ought to split off from South-Western City Schools.  The latter is a sinking ship, and it's sinking because baskets are porous and the whole area is a case of baskets.  I think the Dispatch ran a graphic (think I saw it on CU) that showed that Grove City itself voted in favor of the levy.  It was the outlying townships and other areas of SWCSD that brought the levy down.

 

Scary that the cuts were severe enough to make it into USA Today.

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

 

Um ... OK ...

 

Of all the things that are increasing school districts' costs, I think sprawl is among the least serious.  Teachers' union contracts are at or near the top (not just because of the salary requirements, but because of the contractual inability to downsize well), along with administrative budgets.  Personnel costs typically consume an overwhelming majority of a public school budget.  Transportation and extracurriculars are just easier to cut.

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

Do schools still bus?

The 'shadow' market lives and its growing rapidly. The growth of this limbo market will only cause more prolonged pain to the real estate industry, financial industry, communities and the economy has a whole. Wait until adjustable mortgages and Alt-A's kick into high gear starting in 2010. The only hope in keeping this from wiping out a larger chunk of the US economy is to try and slowly bleed the patient and hope it lives when the long process is over. (Note: This is only parts of the article - its very long.) Link below.

 

Not Paying the Mortgage, Yet Stuck With the Keys

Foreclosure Backlog Imperils Recovery

 

A growing number of American homeowners are falling into financial limbo: They're badly behind on payments, but their banks have not yet foreclosed.

 

The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation's housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.

 

"It just means foreclosure rates are going to keep rising," said Patrick Newport, an economist for IHS Global Insight.

 

...

 

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/23/AR2009062303500.html

Much of that article does make sense to me, and I do think that there will be more financial losses to come, but I'm not sure that it will necessarily be another "wave" of financial losses.  Even just accepting what the article says on its face, well, if banks can wait as long as they want to foreclose, they can space out their foreclosures as necessary to prevent having to do too many at once.  While some homeowners might well be better off if foreclosure relieved them of the burdens of caring for a given property, in my experience, that's a minority.  My understanding is that the sheriff can't lock you out of the property until the bank actually fires a foreclosure action; just falling behind on payments won't do it.  I don't know why the person described in that article did move out.

 

Regardless, the prices are going to have to fall further as people get realistic once more about loan-to-value and loan-to-income ratios and stop buying into the myth of using one's home as a piggy bank.  A home's primary value is as a residence, not as a financial asset.  Even if it nominally appreciates, being responsible for property taxes, maintenance, and (sometimes) HOA or condo fees seriously depresses any real return on it as an investment.  People are starting to rediscover that, which means that people are starting to look at money spent on a mortgage as money that you're not likely to get 100% or more of back (i.e., not what you hope for on an investment).  That means that leveraging oneself to the hilt to buy the biggest house you can afford isn't going to look as attractive to many people, so even people who could buy $300k houses aren't going to be interested in doing so as often.  That means the pool of prospective buyers is self-shrinking, both in quantity (people like me, who could afford houses, are opting not to) and magnitude (people who are buying are looking in lower price ranges than they would have earlier).

Mortgages work this way...

 

You borrow x amount of money from the bank, say $200k.  That is the primary action. You agree to repay the loan set terms.  No where in the loan document does it refer to how you spend the money.  You can spend it on anything you want... vacations, toys, etc.

 

Attached to the loan for $200k is a collateral agreement.  You pledge an asset as security for the loan.  In most cases, that asset is the house you are buying, but it does not have to be.  You can borrow $200k from the bank, use the money to buy a house, but use a different asset (house) as collateral.  You can borrow $200k to buy a beach home, but on the attached collateral agreement you may pledge your main house.  Or you pledge artwork.  Or you may pledge stocks, etc, etc.

 

Now, the primary loan agreement has a clause that says if you default on the payment terms, the lender has several options.  One is to take possession of the pledged asset.  (normally, foreclose on the house you used the loan money to buy). It says the bank has the RIGHT to the pledged asset. It does not say that the bank MUST take the pledged asset.   The bank can simply choose to not exersize its rights as specified in the loan agreement.  It can foreclose if it wishes to, but it is not legally bound to do so.

 

I did not read the link.  But if I were to stop paying on the loan I got to buy my house, I would not move out.  The bank is not legally required to take the house back.  I would stay there until the bank decided to exercise it's option of repossession.  Maybe the bank would come to me and ask for another asset in lieu of the house to satisfy the loan agreement.

 

So in the end, what most people call a 'mortgage' is really just a simple loan agreement, with an asset pledged as collateral (may not be the house/asset you buy), and with terms of repayment clearly spelled out, along with penalties the lender may impose (at their discretion) on the borrower if the borrower does not abide by the loan terms.

 

Much of that article does make sense to me, and I do think that there will be more financial losses to come, but I'm not sure that it will necessarily be another "wave" of financial losses. 

 

I think the next big round of resets (ARMs and Alt-A) will prove to be as big of a hit financially as subprime has been so far. How the banks and the Feds determine how to deal with this next big round of defaults will determine to a certain degree the level of damage that the banks take. ARMs and Alt-A resets are just as high as subprime was, with the only difference being the ARMs and Alt-A's have a much higher dollar value and potential loses (these loans were generally used for people with higher credit scores and on homes with higher dollar cost). Think suburbia and high end urban condo developments.

 

I find this graph very concerning for our economy and country and is one of the reasons I think we have a long ways to go. Add in that a lot of the jobs being lost in this recession have been professional jobs (the category of people that may hold a large portion of the ARMs and Alt-A's) could make this very ugly.

http://socializedlosses.blogspot.com/2009/01/update-of-mortgage-reset-graph.html

 

CincyDad,

Thank you for that clear breakdown. I know we have talked about this in the past as well as the 'moral' obligation side to these loans.

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

Do schools still bus?

 

Not "bus" as in drive kids across town to achieve racial balance, but instead just moving kids from one suburban/exurban sprawl zone to another to get them to a massive centralized middle or high school.

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

Do schools still bus?

 

Not "bus" as in drive kids across town to achieve racial balance, but instead just moving kids from one suburban/exurban sprawl zone to another to get them to a massive centralized middle or high school.

 

Thats what I mean.  In cuyahoga county I dont know any school district that buses kids to school.

 

When I was in Junior High School some of the kids that lived in the southern portion of Shaker or the Western end of Shaker Square/fairhill were bused.

 

What happened to biking to school?

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

Do schools still bus?

 

Not "bus" as in drive kids across town to achieve racial balance, but instead just moving kids from one suburban/exurban sprawl zone to another to get them to a massive centralized middle or high school.

 

Thats what I mean. In cuyahoga county I dont know any school district that buses kids to school.

 

When I was in Junior High School some of the kids that lived in the southern portion of Shaker or the Western end of Shaker Square/fairhill were bused.

 

What happened to biking to school?

 

From the suburbs to wherever the school bus is going?  Have you SEEN the way people drive in the burbs?  I drive through Lakewood twice a week now and they have a little "share the road" lane on Franklin, the main road I traverse. And largely, people do, and there are lots of bike riders out.  In the suburb, almost DAILY I see near-tragic accidents as people swerve out of their lane WAY into the other lane because there is a bike in the road (there is no bike lane), there are lots of people yelling out their windows at bikers to get on the sidewalk, and lots of bikers on the bumpy sidewalks near-missing pedestrians.  The people in the burbs don't know how to behave around bike riders, at least where I live, and it's COMPLETELY not safe. I wouldn't go out there, I wouldn't let my husband do it, and I sure as HELL wouldn't let my kid ride his bike in the streets around here.

 

If they put in a bike lane everywhere, it would definitely help, but I don't think that's going to happen. 

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

Do schools still bus?

 

Not "bus" as in drive kids across town to achieve racial balance, but instead just moving kids from one suburban/exurban sprawl zone to another to get them to a massive centralized middle or high school.

 

Thats what I mean. In cuyahoga county I dont know any school district that buses kids to school.

 

When I was in Junior High School some of the kids that lived in the southern portion of Shaker or the Western end of Shaker Square/fairhill were bused.

 

What happened to biking to school?

 

Sure they do, most of the outer ring suburbs w/i cuyahoga bus to school.  With main artierial streets as the only real way to get around it isn't feasibly to bike to school. 

School systems are throwing so much of their money away on busing, it's sickening. Stupid sprawl.

 

Um ... OK ...

 

Of all the things that are increasing school districts' costs, I think sprawl is among the least serious.  Teachers' union contracts are at or near the top (not just because of the salary requirements, but because of the contractual inability to downsize well), along with administrative budgets.  Personnel costs typically consume an overwhelming majority of a public school budget.  Transportation and extracurriculars are just easier to cut.

 

so sprawl is the least serious reason costs rise, eh?  :roll:

 

aah yes, republicans so enjoy taking lazer aim on one of the last meaningful labor unions in the usa.

 

psst, i didnt tell you this, but if you want to bust the consarned money grubbing commie union you can work to make ohio a right to work state, yep that'll hamstring'em.

 

 

 

Please keep the conversation on topic- US Recession- How deep and how long.  If you want to discuss school finance, feel free to start a school finance thread.

Please keep the conversation on topic- US Recession- How deep and how long.  If you want to discuss school finance, feel free to start a school finance thread.

 

But X, my article about school cuts was related to the recession.

That's fine, but the ensuing busing and sprawl and unions discussion has nothing to do with the recession.

Very well then.

 

This may not be 100% on topic about "how deep and how long," but hopefully it's enough closer to pass muster:

 

http://online.wsj.com/article/SB10001424052970204313604574330733264429044.html

 

Rethinking Stocks' Starring Role

Some financial professionals are challenging the traditional view that long-term investors should load up on equities

 

For at least a generation, financial professionals have urged mutual-fund investors to put more money in stocks than in bonds. The logic: Stocks power a portfolio, while bonds provide some protection.

 

Now some pros are questioning that conventional wisdom. After last year's stock crash, and ahead of a potentially weak economic recovery, they're arguing that bonds and alternative asset classes such as commodities deserve more weight.

 

=====================================

 

I'm not sure how many people here are active investors, but that article had as big of an impact on me as any mainstream news article I've read in the past year.  It's more on the topic about "where do we go from here" rather than a prognostication on how long the recession will last, or whether we'll see a "double dip" recession.  At the very least, I've taken it to heart, and it made me stop and think about whether a lot of people would have been hurt a lot less in the recent recession if they'd had most of their retirement money in bonds rather than stocks their entire lives.

 

Food for thought for those of us who have started picking up the pieces of the last year and a half and are maybe looking for new ways to defend against a repeat of this.

^ I can kind of see why the overall investment market may move away from common shares of public companies as the largest part of portfolios. The notion of growth investing has taken a bit of a beating after the tech bubble, with a lot of people speaking highly of value investing -- of course, value investing still consists of common stock of public companies. I have been working on a theory that the whole notion of "grow, grow, grow", especially combined with the constant cost-cutting that U.S. companies fetishize, is reaching its max. They can't grow any more given the constraints of today's U.S. and world economies and the ones of the near- to medium future. I really think that most of them have gone so overboard with the cost cutting that they have made it nearly impossible for their sales to grow by a significant degree. Therefore, the only way for them to make more money is for them to screw people or get them addicted to their product (with negative consequences for the consumer).

 

Meanwhile, most private companies have a vision that is held strong by one or a few passionate entrepreneurs at the top. They tend to offer more truly desirable products and services and can handle a slow year without shareholders hunting them down and killing them, especially if it means maintaining the integrity of the company and reaping a larger sales increase in the future because of it. Of course, for an individual investor, getting a share of the profit is pretty difficult. Private equity is only available to bigshot investors, and going private equity often gives a private company too many characteristics of a public company to reap the benefits of a visioned private company.

Meanwhile, most private companies have a vision that is held strong by one or a few passionate entrepreneurs at the top. They tend to offer more truly desirable products and services and can handle a slow year without shareholders hunting them down and killing them, especially if it means maintaining the integrity of the company and reaping a larger sales increase in the future because of it. Of course, for an individual investor, getting a share of the profit is pretty difficult. Private equity is only available to bigshot investors, and going private equity often gives a private company too many characteristics of a public company to reap the benefits of a visioned private company.

 

True story.  Several of the last few companies that I've wanted to invest in, I've learned to my not-all-that-great surprise were privately owned and weren't interested in investments from people with less than seven figures to throw around--or weren't interested in outside investment at all.

 

More power to them (good), but less money to me (bad). 8-)

It looks like the recession recovery is well underway.

 

Job outlook hits worst-ever level

Employers' hiring plans at lowest point in Manpower survey's history

 

"SAN FRANCISCO (MarketWatch) -- Employers' hiring plans for the upcoming fourth quarter dropped to their lowest level in the history of Manpower's Employment Outlook Survey, which started in 1962."

http://www.marketwatch.com/story/hiring-plans-drop-to-record-low-manpower-2009-09-08

More bad news for the green sprouts...

 

July consumer credit falls a record $21.6 billion

 

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090908&id=10372514

 

from the article...

 

July consumer credit outstanding fell at a 10.4 percent annual rate to $2.47 trillion, steeper than analysts' expectations for a $4.0 billion drop. Total credit in June tumbled $15.5 billion rather than the $10.3 billion drop previously estimated by the U.S. central bank.

 

the article also points out that

 

Nonrevolving credit, which includes closed-end loans for big-ticket items like cars, boats, college education and holidays, plunged a record $15.4 billion, or at a 11.7 percent annual rate, to $1.6 trillion.

 

Revolving credit, made up of credit and charge cards, dropped $6.1 billion, or at 8.1 percent rate, to $905.6 billion, the data showed.

 

 

Ok, so I guess in the search for an economic driver to get us out of this recession, we can rule out the consumer.  Maybe consumers are strengthening their balance sheets for the moment, which may drive spending in the future? 

^^ Job outlook hits worst-ever level

Employers' hiring plans at lowest point in Manpower survey's history

 

If I am reading the data in the article correctly, it says that most industries will be laying off people faster in the 4th quarter than they are in the 3rd quarter?  Am I reading that right?

More bad news for the green sprouts...

 

July consumer credit falls a record $21.6 billion

 

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090908&id=10372514

 

from the article...

 

July consumer credit outstanding fell at a 10.4 percent annual rate to $2.47 trillion, steeper than analysts' expectations for a $4.0 billion drop. Total credit in June tumbled $15.5 billion rather than the $10.3 billion drop previously estimated by the U.S. central bank.

 

the article also points out that

 

Nonrevolving credit, which includes closed-end loans for big-ticket items like cars, boats, college education and holidays, plunged a record $15.4 billion, or at a 11.7 percent annual rate, to $1.6 trillion.

 

Revolving credit, made up of credit and charge cards, dropped $6.1 billion, or at 8.1 percent rate, to $905.6 billion, the data showed.

 

 

Ok, so I guess in the search for an economic driver to get us out of this recession, we can rule out the consumer. Maybe consumers are strengthening their balance sheets for the moment, which may drive spending in the future?

 

I think the latter part is crucial here.  It may drive up spending in the future, or it may simply mean a necessary transition away from a consumer-driven economy (or at least from one so heavily dominated by debt-fueled consumer spending).  I actually view the contraction in consumer credit as a good thing, not a bad thing, in the long term.  In the short term, the transition pains will be bad (and tremendous for a small part of the population), but the country as a whole can bear it, and will be better for having done so.

 

Keep in mind that this "contraction" is off a high in which people were getting OK'ed for mortgages eight or more times their gross income, where college students already waist-deep in student debt were getting approved for $8000 credit cards, where cashiers were financing Audis, and so on.  There was simply destined to come a point where the endless expansion of consumer debt was unsustainable.

^^ Job outlook hits worst-ever level

Employers' hiring plans at lowest point in Manpower survey's history

 

If I am reading the data in the article correctly, it says that most industries will be laying off people faster in the 4th quarter than they are in the 3rd quarter?  Am I reading that right?

 

That is how I read it.

 

If the consumer side of our economy 70%+ is not going to surge us forward at this time than what are the 'green shoots' and the 'economist' expecting to pull us out of the recession!!? They say we are emerging from the recession? How, with Gum drops, lollipops, and sugar plums?

I ran some BLS employment numbers for the Dayton MSA and I dont see a recovery yet.    It looks like a bottom, but I am interested in how the 4th quater will look, particularly for the services producing sector (private sector, not govt).

 

I might post the graphs tomorrow.  Would you all be interested in seeing statewide numbers?

Definitely.