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December 07, 2007


unfortunately, the solution used by FDR won't even get a glance with the present Administration, since it used a 'socialised' method to attack the problem. Anything that whiffs of socialism (to this regime) will get shut down as quickly as they legally can, or starved of funds into uselessness.

Gotta let the Rich get Richer, and the not-Rich get screwed, ya know?

The extremely rich will pick up more properties after the banks dump the paper. Foreclosed houses aren't selling since they are priced far above market, and after being empty for a year are not quite habitable without extra expense and repairs. Look at the Tracy-Manteca area to see how quickly nice neighborhoods get seedy when a third of the houses stand empty.


Yes, the feudal designation of "lordship" is apt, since the occupants of such properties can't afford to move away and poverty is as binding as servitude. Landlord-tenant law hasn't changed much at all in the last thousand years, and once the exponentially increasing income inequities start ripping the veil from society, we'll see how far we regress.

If we only reenter the Middle Ages, we'll be lucky. Servitude is marginally better than slavery, because there is some hope that a middle class of tradesmen will rise again, and people will build. If Pax Americana and dynasties and imperialism and holy war ordered by demagogues become triumphant, coupled with a large mass of unemployed homeless people, it will become truly barbarous. New Orleans shows how the moneyed class would rather lock up and ignore victims of circumstance and poverty.

The Glory that was Greece and the Splendor that was Rome? ONLY if you were patrician! MALE, white, and disgustingly rich. The landowners. Land was income, and your status was determined by your properties.

Could Greenspan really not have foreseen where these mortgages were heading?

I am a child of the depression, born in 1931, and I am amazed there is much that I still recall of that time. My father finally able to buy a home in 1937 with his long-delayed Veteran's Bonus; the young neighbor with a University degree in Accounting who was pumping gas for pennies for his meager living; and much, much more.

And I recall this from much later reading. The great author, William Manchester, wrote the book "The Glory and The Dream". In the study of Roosevelt's early presidency he noted a letter to the President by a constituent.

"Dear Mr. President,

This is just to tell you that everything is all right now. The man you sent found our house all right, and we went down to the bank with him and the mortgage can go on for a while longer. You remember I wrote you about losing the furniture, too. Well, your man got it back for us. I never heard of a President like you."

I keep hearing how people bought homes that they knew they could not afford,but bought them anyway, "it too bad for them they should have known better". I know a few people who bought modest homes, hard working people with families trying to keep a roof over their heads, honest and maybe not as business savy as they should have been, that have been taken advantage of by the mortgage co. As explained to them it seemed that they had a reasonable loan and could meet the payment. It angers me that the mortgage co's who perpetrated these loans get bonuses and the homeowner gets the wrap.
Where is congress in all of this?
What they should do is go in and slap a fair fixed rate on all primary homes these mortgage co. made (that issued bad loans) to primary home owners and tooo f-ing bad for the mortgage co. They have had their cake, now shut up and be glad you are not going to jail.
I find it appalling that you cannot trust a bank or mortgage co to make a loan that is fair and still make a modest profit. Greed, Greed is all it is, what does this say about this society? Sexual preference and all of those issues that seem to absorb the religious rights's time is not what will destroy our country, it is the greed and avarice that will be our ultimate undoing.

EW am I able to contact you off line?

I saw houses go on sale here in Cali and be sold the next day. I thought to myself, who in the heck is buying all these homes, who has the money. I would love to buy a home and still cannot aford to buy a home, so I don't even know how those people did it....so I really do not feel sorry for any of them. To me it seemed like a feeding frenzy of paranah's, it was almost like a trendy thing to do...it was almost like lemmings. Homes would go on sale with a high price tag and be sold the next day or two...I still could not comprehend how these went on sale so fast and where snatched up so fast. Now I drive by homes that have for sale signs and they stay up, like they used to before this frenzy. So maybe I don't know the whole story behind these mortgage companies if they were baiting people or not. But you usually don't go into a large purchase unless you are ready for it. I hope the prices drop to something reasonable, but I doubt they drop too much to still be affordable for some of us in the middle class, at least here in Cali where a teensy house can be a mill.


Try real estate investors and speculators: they'll rent or lease them out, and sell when they've made what they think is a good profit. Has nothing to do with living in the houses - some areas are trying to cool this off by requiring that buyers live in the house for six months or a year or some other fixed length of time.

The key to the success of the FHA system, a system that dominated housing finance from the mid-30's well into the 1970's, was not that it was "socialist" -- in fact, all it was was an Insurance Program. If a house met fairly strict construction standards, zoning standards, and if the buyer met basic credit standards, the 20 year mortgage was Insured. That limited risk to the Banks and Savings and Loans that wrote the mortgages.

Under the system pre-FHA, no mortgages ran more than 5 years, and most of that was interest on principle. After five years, one re-wrote the mortgage, and the cycle began over again. Under that system, Home Buyers usually had two accounts, one to pay the note, and another savings account dedicated to the reduction of the principle on the dates when the 5 year all interest note came due. One reason the situation in the 30's was so bad had to do with the Bank Failures, which wiped out the principle reduction savings accounts. FHA, with the longer mortgages, required some reduction of the principle early in the life of a mortgage, meaning that from just the first year, people had some significant equity in their homes. Such was good discipline for both borrower and lender.

I am not suggesting that just a return to FHA Insurance principles would solve the current problem -- but it would be a great idea for us all to reclaim the history of the fact that Roosevelt did invent FHA -- and it brought stability to the housing market for at least 45 years. (VA was similar to FHA -- it too was an insured mortgage program). I don't expect our Senators and Congresscritters to talk about this -- many probably don't even know the history, and they are far too dependent on the Financial Industry PAC contributions. But if the folk around the country could just retrieve enough of that history to make the point that once upon a time FDR and a Democratic Congress did sponser a program that housed the middle class well, then I think they would feel the right kind of pressure.

Sara, in my haste to rant I forgot to say how I always enjoy your posts! Thanks

Sara - the system that you describe in your comment at 15:41"...no mortgages ran more than 5 years, and most of that was interest on principle..." is almost exactly the system that is in place in Canada - mortgage terms range from 6 months to 5 years, rarely getting into 7 or 10 year territory, and the vast majority are insured through the Canadian equivalent to FHA, with a premium of 1 to 2% of the mortgage balance if it is over 75% loan-to-value ratio. And yes, the payments are blended interest and principal, with 99% of the payment going to interest at first, and gradually declining so that half-way into the amortization you start to make real progress on the principal. And the result has been that more Canadians are homeowners - and, as long as the banks dont sucker them into additional home equity loans that suck out the equity they are building, the mortgage is fully portable by law to any other lender who is willing to take over the mortgage - which is almost all of them, as long as the mortgage is current, due to the presence of the government guarantee. Stability in the housing market is as much a product of sensible building restrictions and good underwriting of risk as much as it is the actual terms of the mortgages in question - if the banks are adequately regulated and required to keep good capital ratios, the ruinous leveraging that has led to the US mortgage and credit crisis can be avoided.

I'm getting so tired of smug people complaining about the fools who took out these loans they could never repay. I lived in California in 2002-2004 and I remember being prequalified for a mortgage where my monthly payment would be 90% of my take home pay in 2002, and that was just the beginng of the bubble. It was madness, and I finally got out of there. But not everyone can or should move out of state, and the alternative to getting a loan you couldn't afford was often renting a home that was almost as unaffordable, but didn't offer the promise of equity or appreciation. People did what they had to do to get along, and what every single financial advice writer or TV pundit was telling them to do.

The banks or the Fed could have stopped the madness by not approving loans for homes they knew were overvalued (If your appraisal was lower than what you were offering, the deal did not fall apart, the bank's appraisers merely fudged the numbers upward), imposing sensible lending standards, etc. The blame ends up on the buyers, but the buyers are not getting free homes, or anything else free. They are losing their life savings and homes. Every proposed bail out is really a bail out for the banks, not the buyers. It doesn't do a buyer any good to be able to throw good money after bad for an extra few years by paying more on a mortgage than the house is even worth. The banks too a gamble on those houses too - let them choke on them in foreclosure!

The real estate bubble is world wide, the US is just the biggest basket case. It's INFLATION that doesn't get counted as inflation because it is in capital assets. But it still makes it harder to make ends meet for anyone who rents or owns, and it is impoverishing tens of millions, whether they rent or were foolish enough to have bought.

Just because you weren't foolish enough to have bought an overpriced house, doesn't mean you have no responsibility, especially if you voted for the antiregulatory idiots that run DC and your statehouse.

Yes, but there is another hard factor in the value of houses, as the Real Estate People will tell you, Location, location location. In part, that means you buy into or own property in a neighborhood where all houses are occupied, houses are kept up, and lack of standards gets some notice.

Given the current situation, this issue which is neither borrower nor lender based, is critical. It is a huge determinant in whether a neighborhood or section of a neighborhood maintains reasonable value as the bubble inflation is squeezed out of the system. It is clearly in the interests of all home owners to see appropriate regulation reintroduced into the system as a protection of their home's value. Recently some suburbs in the twin cities have seen foreclosed houses used as "grow houses" by pot farmers. Hardly the kind of next door neighbors someone paying off a 500,000 note is interested in having. But distant lenders who have repossessed property, and found a willing renter, hardly are going to check background or pay much attention to how a place is being used. In otherwords, the destruction goes way beyond just the borrower and the lender.

Bush is putting a band-aid on a drowning victim. His would be "fix" supports the finance industry while denying help to those most in need of it, the many victims of predatory lending practices.

Comprehensive reform could begin with a few simple steps. These would target borrowers while attempting to lay the cost onto predatory lenders, including lax regulatory agencies that permitted novel, complex debt instruments to be labeled AAA. The knock-on effects of not doing this would make ghost towns of many neighborhoods, something that's already happening.

Two steps would make a fast start. Bankruptcy laws need immediate reform to give family borrowers and homeowners the same rights that Fortune 100 companies like Delphi and Dana have. Instead of gutting their union or lending contracts, individual borrowers would revise their mortgages and give their biggest lenders no more than they would receive in an immediate liquidation. Reform would expand the paltry current exemptions, allowing borrowers to retain enough assets to assist their recovery.

This is needed, in part, to counteract Bush's earlier bankruptcy reform - more accurately called the No Credit Card Company Left Behind Act. Coming into effect in late 2005, it treats borrowers like serial adulterers and mandates substantial repayments to creditors, gutting the notion that bankruptcy should allow people to start over, not force them into indentured servitude to their creditors.

The second step is to expand the current nationwide regulation of credit card lenders. Card issuers locate in such places as the Dakotas not because of their time zone or central mailing location, but because their state laws create legal Guantanamos where GOP legislatures permit lenders to do as they will, including charging interest rates of 25% or higher. For starters, reform would prohibit excessive interest rates, penalty and other fees, and cross-defaults.

Some pigs may always be more equal than others. But we don't have to submit quietly. The current corporate socialism redistributes wealth to the few while causing problems for the many. We can limit its excesses while providing a leg up not for corporate lenders, but for the average Americans who vote and pay for government.

Bush is paying lip service - he won't do shit, just like he doesn't do shit on anything else. And when he DOES doe something it's shit, so don't expect shit on this unless you want shit.

Bush is a front man for the ruling elite who want only for government to get out of the way of them fleecing everyone else. This is the what happens when government begins serving the interest of the powerfull instead of acting to balance the interest of all. That generally means looking out for the little guy, because the rich will always get theirs.

Ultimately, they always drain to much blood from the hog, the hog dies, and everyone starves for a while. It's just the way it is.

Sara - This is in response to the comment you posted at Marcy's new place; seeing your connection issues, I wasn't sure how quickly you would go back there, so i am posting this here too. Your points, as usual, are well taken. As to Marcy's new site, the problems you report are, to the best of my knowledge, not common, at least for windows XP users. There have been several folks, including me to a limited extent, that have had different problems using this site with Safari on Macs, and some Windows people using the Opera browser and/or dial-up internet provider service, but haven't seen much like your complaint. There has to be some easy corrective remedy (like a simple settings change or something) for this....

Glass Steagall.

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