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handofdave 3515 posts |
Sep 19, 2008, 22:27
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Ha! Exactly the sort of condescending jive I've actually encountered.
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magiceye 183 posts |
Sep 19, 2008, 23:26
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IanB wrote: shanshee_allures wrote: Am I the olny one who thinks 'Freddie Mac and Annie Mae' sounds like a couple of radio 1 djs? :-) x I was thinking Jimmy Mack and Maggie May. Which dates me! IB Ha ha ha, me too! The depressing thing about all of this is that in a short space of time it will all be forgotten and custodianship of the economy will again be returned to the very spivs and "risk takers" that we have always been told we should admire ("why can't you be more like Cousin Wideboy?"). It's the Mr Toad syndrome. We all feel contrite and chastened when we catch a cold, until the next bright shiny opportunity comes along and it will be "poop, poop" and off we go again. However when it all goes tits up these multi-billion dollar businesses all run crying to governments and start suckling greadily on the beleaguered public purse to the tune of hundreds of millions. What is immoral is that these institutions, be they multi-nat banks or your local estate agents, have made a killing in recent years, and rather than put something aside for a rainy day have squandered this on bad debt - our bad debt, encouraged through irresponsible lending.It's then down to the working person to foot the bill through our taxes. Two of my local estate agents have gone through the hoop in the last fortnight. I'm disinclined to shed too many tears, I have to say. Anyway, "the market" sucks shit, and I'm of to bed!
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nigelswift 8112 posts |
Edited Sep 20, 2008, 09:25
Sep 20, 2008, 09:15
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I think there's a huge problem that the plan to buy up bad debts hasn't and can't yet evaluate. Injudicious lending has two elements - giving money to people who are at high risk of not paying it back (and the degree to which that has happened can now be evaluated) and giving money against dodgy and over-valued security - and the degree to which that has happened can't be known until you come to attempt to sell the security. At present, you might think a $200,000 loan against a security originally valued at $200,000 that has subsequently probably reduced in line with housing statistics to a probable $150,000 is $50,000 short. But this pre-supposes the original valuation was correct. In truth, dodgy lending includes major pressure on professional valuers and accountants to be over-optimistic on the value. This ranges from "optimism" to outright fraud. (It works like this - all lending institutions have "panels" of valuers. If a valuer provides a less-than-adequately high valuation guess how many more valuation instructions he gets sent? This applies right across the board and is universally known in the industry yet can never be proved by an outside agency. Panel valuers are dropped merely because of "spelling mistakes" or whatever. As someone that was employed picking through and identifying thousands of dodgy or fraudulent valuations after the last bubble burst I fear that this will be an enormous factor. And right now, the bail out is being calculated purely on the basis of the supplied valuations, with no-one having the faintest idea of how overstated they might be. The American taxpayer is buying a pig in a poke and might have to shell out another huge sum in a year or two.
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stray 2057 posts |
Edited Sep 20, 2008, 10:10
Sep 20, 2008, 10:04
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After the last bubble though properties did eventually reach their overvalued state, in fact they broke it considerably. I'm wondering as you're someone who has seen this from inside if you think that will happen again ? Also, I think it's important to note that this bail out isn't just covering the mortgage, insane credit, debts but also the garbage debts in other markets. It's not touching the problems in derivatives though. I dunno, it all depends how these debts get traded. Granted, nothing they're suggesting isnt gowing to blow up later, it is, but it's very unpredictable as to how it'll play out. After all, the last time something similar was done the govt did actually turn a profit out of the debts it bought. Basically, although you'll never see a commentator over there say it, the US govt is nationalising the market. They'll have more control over it than they've ever had. It will be interesting to see the full details of the plan, especially how the debt auction will work (and when), and also how the agency they set up to manage it functions within (or creates a new) legal framework. Whatever, I forsee China and other sovereign funds (singapores perhaps) owning a lot of US banks eventually. Edit : Also, I think you're wrong about the bail out being based on current valuations, although obviously it has to cover the debts (which were obviously based on them) there is talk of buying debt at discount. Also as the plan is also covering debts in other markets, other than property, there will be offsets in that regard. Or have I got it wrong ?
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nigelswift 8112 posts |
Sep 20, 2008, 10:38
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"Also, I think you're wrong about the bail out being based on current valuations, although obviously it has to cover the debts (which were obviously based on them) there is talk of buying debt at discount." Sorry, didn't make myself clear. I meant the discounted value is discounted from the original valuation - they have no other guide unless they do millions of new valuations in a very short time - and that original valuation may well be highly dodgy. As for what will the housing market do now, I dunno, nor does the govt. I suggest. It'll go up. One day. And that's as authoritative as you'll get. I was well aware of the statistical elements of the building societies' monthly property reports and predictions and honestly, they were complete flim-flam, just headline seekers, and they knew it. As for the Royal Institute of Chartered Surveyors and their "this month 76% of our members in Anywhere Town reported a rise in prices" well that's just cock, most of them are lucky to sell a single house a week and that's hardly likely to be similar to the one they sold last week so they're just complete liars.
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stray 2057 posts |
Sep 20, 2008, 10:53
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Aha! Right, I got yer thanks, makes sense, cheers. :) The price, like the price of anything, is whatever people can/will pay and the easy/silly credit made it balloon, as people could afford more than they should be able to. But as you've explained, the original valuations are arbitrary and don't actually relate directly (in a proper mathematical relationship) to what was happening in the internal credit market. Its a chicken/egg relationship, and now the egg doesnt exist anymore.
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nigelswift 8112 posts |
Sep 20, 2008, 11:13
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"Its a chicken/egg relationship, and now the egg doesnt exist anymore." Well in the fifties, when you wanted a mortgage, you'd have to beg, then go on a six month waiting list, prove you and your parents and grandparents were respectable and then maybe they'd give you a 75% loan. In the past decade, mortgage intermediaries package applications having fictionalised the status of the applicants and the property and next day decisions could be given for 13O% loans! It was an open secret that for a period the largest UK building society asked for the names of references but rarely followed them up! As a young valuer a local agent offered me £1,000 per "good" valuation. Not bad for an hours work, for someone with a young family earning less than 8K a year! And really, proving someone is crooked is quite hard, it's only a "judgement" after all.
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handofdave 3515 posts |
Sep 20, 2008, 15:52
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Property ownership also used to be seen as a multigenerational investment. The population is more restless and transient than it used to be, which means homes are treated more as a commodity and less as a place to put down roots for the long haul. The damn house flippers of the last decade, who treated homes as a vehicle for making ridiculous fortunes, were a big part of what inflated the market to those preposterous, shaky heights. What's needed is for all of this to swing back not to the fifties model or the hypervalued model, but somewhere in between... I don't think the migration of land ownership back into the hands of the few is a good sign at all.
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magiceye 183 posts |
Sep 20, 2008, 23:47
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Apologies if the point has already been made but it seems that there is one party to all of this - yer speculators - are making a killing out of the pretty desperate situation we now find ourselves in. So as far as I am concerend their unearned income should be heavily taxed, and the whole practice regulated (dirty word, I know) as it now seems to be, post-crisis. But as I've said elsewhere, once the panic's over these same wreckers will be given their bat and ball back to do as they want until the next meltdown. The idea of the Bank Under the Mattress hasn't looked so apealing in years.
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grufty jim 1978 posts |
Edited Sep 21, 2008, 03:06
Sep 21, 2008, 03:04
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When asked about the current financial crisis and the rumours that the UK government are planning to increase regulation of the financial system, the Tory Shadow Chancellor (for overseas folks who may not know, that's the conservative economic spokesman) made this remarkable statement... George Osborne wrote: No one takes pleasure from people making money out of the misery of others but that is a function of capitalist markets. I accept he's being refreshingly honest. But for a man who inherited a small fortune (and who will one day be known as "Baron Osborne") to publicly acknowledge that fact and yet still remain a vocal advocate of "capitalist markets" displays a kind of callousness that in a sane world would automatically disqualify him from public life. This is not a sane world. (via Chicken Yoghurt blog)
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