Thread: Bank failure(s)

Turn away students I find that VERY hard to believe. Not only do we allow students in, we also have a significant number of professors. Then add in religious visas. I am sorry it sounds a bit dodgy at best.

Originally Posted by SheepOfBlue

Turn away students I find that VERY hard to believe. Not only do we allow students in, we also have a significant number of professors. Then add in religious visas. I am sorry it sounds a bit dodgy at best.

We also were at record rates of "retention" of foreign students the last few years too.

I don't know if that is declining now.

So I take it the article is bullshit...

Originally Posted by smoothrideronli

So I take it the article is bullshit...

The bit about banking systems working better is definitely true. Not sure about the rest.

Originally Posted by phobe

The bit about banking systems working better is definitely true.

Our banking systems worked exactly as the government wanted them to, and were very efficient in their execution.

This is not a banking failure.

It's a political policy failure, with a gigantic portion riding on Bill Clinton's and then W's (for not stopping the madness) shoulders.

See, ya nearly cracked, didn'ya? It's always darkest before the dawn.

Wall Street up 4%, Asia flat to up 3%, Europe up 1-2% this morning.

Japanese exports down 46% year-on-year in January. The yen fell to a three-month low against the dollar. Toyota cut production 43%, of which US production was down 65%, Honda 33%, Mazda 65% and Nissan 54% in January worldwide. US consumer confidence index fell to 25 from 37.4, the lowest since 1967. US OFHEO house prices rose 0.1% month-on-month.

Geithner at Treasury still does not have a single undersecretary in place. You'd think he could do with a hand.

Originally Posted by oldfogey

See, ya nearly cracked, didn'ya? It's always darkest before the dawn.

Wall Street up 4%, Asia flat to up 3%, Europe up 1-2% this morning.

Japanese exports down 46% year-on-year in January. The yen fell to a three-month low against the dollar. Toyota cut production 43%, of which US production was down 65%, Honda 33%, Mazda 65% and Nissan 54% in January worldwide. US consumer confidence index fell to 25 from 37.4, the lowest since 1967. US OFHEO house prices rose 0.1% month-on-month.

Geithner at Treasury still does not have a single undersecretary in place. You'd think he could do with a hand.

That is what I worry about but how many of these mini surges have occurred with the decline to continue afterward? What scares me is I can see the policies of our government (and others) killing growth for a while. Thus the bottom could be long and deep. Of course if I am wrong I take a bigger hit than continuing the ride down

Further if the government takes over the auto industry, bank and medical like things are looking that is to large a chunk of the economy under control of clueless drones with no interest in profit (after all you make your money by confiscating it right?)

Originally Posted by luvtolean

20% used to be the standard until our politicians pushed the lenders and regulatory agencies to do away with these standards and get more people in to mortgages.

You're much to smart to make this blanket statement. You can't possibly think this came about without massive pressure and lobbying from the banking and lending interests, can you? Like there was nothing in the unlocked candy store for them?

Do you think that these lenders were responsible in the way that they went about marketing these mortgages, or that some took advantage of the poorly written and enforced regulations to make short term money at the risk of fucking up the whole system?

Did you ever hear of a bank that was sued or sanctioned for not giving mortgages without a reasonable credit check and down payment? Or did they all get in line to compete with the Rock Financials of the world?

Attaching blame solely to the 'politicians' and letting the financial sector off the hook for this is forced and not nearly accurate.

Economics being what they are, people in the US kept spending the maximum amount of money they had to buy a house, as the tax codes (such as writing off interest, depreciating rental properties, which I find appalling, and Cali Prop 13, worse than appalling, are some good examples) then lenient lending practices and deregulated derivatives encouraged, and it got to the point most working people couldn't buy a house with 20% down as the prices were too high and climbing much faster than salaries (so people like me couldn't even save fast enough to get in- fuck you all, I'm renting).

Rail all you want against prop 13 - The resulting inequity for those who don't yet own a house has another side of the coin. Without some protection from property tax inflation my parents wouldn't have been able to keep their home after they retired. The house appreciated from 45K (1970) to 1.6M (1995) at the height of the bubble. Not their problem. Not their fault.

And if, as you suggest, the tax system wouldn't have made home ownership the sole interest shelter for people's incomes and if the banking industry hadn't (been allowed to) come up with wild and unrealistic ways of buying these massively inflated houses, there wouldn't have been a problem in the first place.

Are you suggesting rental property shouldn't qualify for depreciation?

Originally Posted by CBRVFR

Attaching blame solely to the 'politicians' and letting the financial sector off the hook for this is forced and not nearly accurate.

I always place the majority of the blame with the decision makers. Lobbyists don't make choices, they make noise.

Had the decision makers, in this case the politicians, not done what they did, the banks could not have done what they did.

Rail all you want against prop 13 - The resulting inequity for those who don't yet own a house has another side of the coin. Without some protection from property tax inflation my parents wouldn't have been able to keep their home after they retired. The house appreciated from 45K (1970) to 1.6M (1995) at the height of the bubble. Not their problem. Not their fault.

Their house would not be worth $1.6mil without prop 13.

Prop 13 was not written to protect retirees, or the scope of the prop would've limited to them only, and notably would've excluded the lobbyist's funders for this bill, the commercial real estate holders. Even if it was limited to retirees, I would hate it less, but still hate it. Quite frankly, it doesn't bother me if retirees can't afford million dollar (in 1995 dollars) houses in retirement.

Sell the thing so a young family has the chance to move in and enjoy what your family did, the retirees can move to a place that is more suited to their needs. They don't need to live in big houses located where the jobs are.

Instead, that young family needs to get a 0% down mortgage on a house in Riverside, has to pay Mello Roos (on top of inflated Prop13 taxes) so they can get city services, has to send their kids to private schools if they want the same school performance their parents got pre-Prop 13, and commute 3 hours a day, in most households both parents will have to work this schedule, fucking up all possibility of spending actual time with their kids.

Prop 13 also hurts the mobility of the workforce, which is a bad thing as well as it is a key strength of American workers.

Are you suggesting rental property shouldn't qualify for depreciation?

Absolutely. Depreciation is for business and production equipment that traditionally depreciates over time. Like a computer, a lathe, software, a vehicle, an oven.

Our whole system is built around the idea real estate appreciates over time, yet we let "business" owners of property depreciate their assets like a computer, as well as deducting costs associated with maintaining the property.

Asinine.

Originally Posted by luvtolean

I always place the majority of the blame with the decision makers. Lobbyists don't make choices, they make noise.

Had the decision makers, in this case the politicians, not done what they did, the banks could not have done what they did.

Sure, but the lobbyists did a great deal more than make noise. They wrote the legislation, supported the candidacies of many politicians, and exerted a great deal of money in a public relations effort to CREATE the canard that this would create home ownership and spread the American Dream. The public ate it up, and pressured the 'decision makers' to comply with their wishes. It sounded like a good idea at the time, I guess - there wasn't a Greek Chorus of doomsayers as I recall, and the public was strongly behind the idea.

Clearly those who approved the policy were guilty of not foreseeing the worst case scenario, but the churning of high risk mortgages through worldwide ponzi schemes probably wasn't in anyone's calculus.

Their house would not be worth $1.6mil without prop 13.

You're wrong. In the 8 years before P13 was approved in 1978, the house had increased in value 1000 percent. The taxes were far more expensive than the mortgage.

Prop 13 was not written to protect retirees, or the scope of the prop would've limited to them only. Even if it was, I would hate it less, but still hate it. Quite frankly, I also don't have too much of an issue if retirees can't afford their houses in retirement.

It was written to protect the investments of families who were being taxed out of their homes. My dad wasn't retired at the time, but it was a struggle to keep up with the rapid rise of the value of the house and the voracious appetite of the taxman.

Sell the thing so a young family has the chance to move in and enjoy what your family did, the retirees can move to a place that is more suited to their needs.

All due respect, . It's my mom's place. It's paid for. She has lived there for 40 years. It suits her needs. She's not living beyond her means or exploiting the residual value with a risky second mortgage. She wants to live there as long as she can to enjoy her neighbors and her independence.

So she and other retirees should have to sell their homes to some young couples? What, and be institutionalized? Fuck that. I'd think you would be against that in principle.

Instead, that young family needs to get a 0% down mortgage on a house in Riverside, has to pay Mello Roos (on top of inflated Prop13 taxes) so they can get city services, has to send their kids to private schools if they want the same school performance their parents got, and commute 3 hours a day, fucking up all possibility of spending actual time with their kids.

Or they could move to flyover country and live where it's affordable, or get jobs that remunerate them commensurate to their ambitions.

Absolutely. Depreciation is for business and production equipment that traditionally depreciates over time. Like a computer, a lathe, software, a vehicle, an oven.

Our whole system is built around the idea real estate appreciates over time, yet we let "business" owners of property depreciate their assets like a computer, as well as deducting repairs to the house.

Asinine.

Hmm. You might have something there, but I'm sure such a disallowance would cause even higher rents.

No way dude..

I have a busy morning to go earn the money to pay the my, the oldster's and commercial real estate holders taxes.

I'll rebut tonight.

Originally Posted by CBRVFR

Without some protection from property tax inflation my parents wouldn't have been able to keep their home after they retired. The house appreciated from 45K (1970) to 1.6M (1995) at the height of the bubble.

CBRVFR

If your folks still own propery locked into prop 13 you, your siblings....not sure about kids... can buy the property from your folks and transfer down the tax base.

My parents worked hard, saved money, drove old cars, spent very conservatively and bought a bunch of properties. I bought a property off them and transferred it and its tax base into my name. They had to live in it for 5 years prior to selling it to you though. Think its prop 57?

Wall Street ended 1% down, a split overnight between developed and emerging markets: Japan was flat; China down 4%. In Europe markets are 2% higher this morning, but Latin America was down 1-2%. Pakistan down sharply on the news that Nawaz Sharif, one of the key politicians involved in the pro-democracy coup, has been barred by the Supreme Court from running for office.

RBS proposes putting $500bn of assets into the UK government's reinsurance programme after announcing a $34bn loss, a UK record. Citi is rumoured to be close to a deal with the Treasury for new financing that does not involve nationalisation (or, importantly, bond issue defaults). AIG is rumoured to be split up to allow asset sales but the government would have to keep "toxic" insurance and derivatives contracts and convert loans into equity in the divisions to be sold.

UK house prices were down 17.6% year-on-year in February. US existing home sales fell 5.3% month-on-month in January. Sales in the West are up 29% year-on-year on foreclosure activity. Median home prices are down 14.8% year-on-year nationwide and down 25% from the peak. US nationwide house prices to income ratios are either equalling (Case Schiller) or below previous lows.

Hong Kong's exports fell 21.8% year-on-year in January, the worst drop in fifty years (March 1958). Singapore's Q4 gdp dropped 2.1% quarter-on-quarter, 4.2% year-on-year, the biggest drop for 33 years.

Originally Posted by oldfogey

Geithner at Treasury still does not have a single undersecretary in place. You'd think he could do with a hand.

Good obs...

Our media here is just beginning to report on this...probably due to Obama's latest announcement of yet another massive task being placed upon Geithner's already full plate...

Originally Posted by oldfogey

Citi is rumoured to be close to a deal with the Treasury for new financing that does not involve nationalisation (or, importantly, bond issue defaults).

I recently read Citicorp was founded in 1812.

To survive that long and die in this...

Originally Posted by CBRVFR

Sure, but the lobbyists did a great deal more than make noise. They wrote the legislation, supported the candidacies of many politicians, and exerted a great deal of money in a public relations effort to CREATE the canard that this would create home ownership and spread the American Dream....

Who made the decision?

Originally Posted by CBRVFR

You're wrong. In the 8 years before P13 was approved in 1978, the house had increased in value 1000 percent. The taxes were far more expensive than the mortgage.

That is a self correcting problem, one way or another. People only make so much money. To create silly laws rather than let supply and demand sort it out does not make sense.

It was written to protect the investments of families who were being taxed out of their homes. My dad wasn't retired at the time, but it was a struggle to keep up with the rapid rise of the value of the house and the voracious appetite of the taxman.

And it fucking failed, completely.

Oh sure, the taxes on the house didn't go up, but spending didn't go down either. So the politicians raised taxes and fees in other places to compensate. CA income tax is up, sales tax is set to hit 10%, vehicle tax is doubling, they had to pass laws called Mello Roos to put the burden of prop 13's inadequate funding on families buying a new house rather than the commercial property owners who paid the lobbyists to write and help pass this bill.

Our extended family was chased out of California in the 90s due to the cost of living. We'd been here for generations. If you can't keep up, get out of the way. No sympathy from me. That's how a dynamic economy works. You go to China and they brag to you about chasing out the old people to build new businesses. That is the competition.

If the problem was taxes are too high, we should've figured out how to cut spending. Period. Otherwise, that tax bill doesn't go away, whether it's property tax, or something else. Unfortunately for future generations, that something else has increasingly been to borrow the money, further penalizing them. Even worse, part of that tax bill is handed down to non-property owners, who are likely least able to afford it.

All due respect, . It's my mom's place. It's paid for. She has lived there for 40 years. It suits her needs. She's not living beyond her means or exploiting the residual value with a risky second mortgage. She wants to live there as long as she can to enjoy her neighbors and her independence.

Your objectivity is screwed up, quit thinking about your mom. I know you agree with the republican system where laws SHOULD do the greatest good for the most people.

Keeping one retiree in a big house she likes, and penalizing an entire young famaly who now has to bear her tax burden, their own tax burden, long commutes hurting worker productivity and many other follow on unintended consequences such as figuring out how to pay for private school for their kids so they can match the education quality of pre-prop 13 taxes is not a good trade.

No economist, who would attach dollar values to all of that, would call Prop 13 a good deal.

So she and other retirees should have to sell their homes to some young couples? What, and be institutionalized? Fuck that. I'd think you would be against that in principle.

If a person, retiree or not, cannot afford their house, they should take all that equity and move out to a place not in the middle of the mix. It's a classic CA story. I'm not talking about rest homes. I'm talking either a much smaller house in the area she's in, or a community away from the coast, Palm Springs, Sun City is near Perris, a different state, new country, whatever.

Or they could move to flyover country and live where it's affordable, or get jobs that remunerate them commensurate to their ambitions.

The workers need to live near jobs. The closer the better, for everyone. Most of the GDP in this country is created near the coast, that will not change in our lifetime barring world war.

The young people are generating the GDP that feeds the country and raising the next generation to continue to pull the yoke. Allow them to be as efficient as possible, our "best in class" worker productivity is why we as Americans enjoy our standard of living. Anything we can do to improve worker efficiency should be a top priority.

Surely I don't need to show you the studies on how much commuting hurts worker efficiency? How about the difference in raising children; doesn't everyone talk about a parent spending time with kids is critical?

None of that applies to retirees.

or get jobs that remunerate them commensurate to their ambitions.

Retirees should've saved for a retirement commensurate with their wants.

"She" and I are incredibly ambitious for just that reason. We want to live the lifestyle we have now, a lifestyle we purposely hold down, maybe a bit better, for life. We want to be multi-millionaires in retirement so we can choose.

Hmm. You might have something there, but I'm sure such a disallowance would cause even higher rents.

Good point as well.

Wall Street off 1-2% yesterday, Europe similar this morning, but Asia generally up 1-2%.

Hungary seeks $230bn EU package for Eastern Europe. More than 40% of UK householders could be in negative equity (loan bigger than market value) on their homes by the end of the year, a bank report says.

The US budget proposes a deficit of $1.75trn for fiscal 2009, 12.3% of gdp. Republicans condemned it as "tax and spend". Speaker Pelosi praised the spending priorities. US new home sales fell 10.2% month-on-month in January. US durable goods orders fell 5.2% month-on-month and 23.3% year-on-year in January.

Lloyds Banking announced a $15bn loss for 2008, though the old Lloyds Bank made a profit of over $1bn while the failing HBOS was marked to stricter accounting in the merged group. Yahoo announces a restructuring, merging its technology product areas into one group and creates a more linear management structure from its previous matrix.

Edit: US Q4 2008 gdp was revised to -6.2% quarter-on-quarter, annualised (most other numbers previously quoted for other countries are not annualised, so the US number is 4x the equivalents elsewhere). The big change from the earlier estimates is in stockbuilding, now estimated at -$20bn annualised against the earlier assumed $6bn growth in Q4.

Edit2: http://www.reuters.com/article/ousiv...51Q1C620090227

Opel (GM Germany) works on separate rescue plan with German government: others to take equity stakes. Talks to sell Eisenach plant to Daimler for small car production (currently Opel Corsa) but deal denied by Daimler.

Canadian stocks surged yesterday on higher than expected earnings by the major banks. Meanwhile the CBC now wants a bailout.

Markets down after another weekend without material policy action. Wall Street was down 2% on Friday, Tokyo down 4% today and Europe down 2-3% this morning.

HSBC, Europe's biggest bank, announces $17.7bn rights equity issue. AIG is rumoured to have struck a Q4 08 loss of $60bn and the restructuring package being negotiated includes another large capital injection by the government, possibly $30bn. The US government will convert $25bn of preferred stock in Citi to common shares, as will the Singapore government, diluting existing equity holders 75%.

The EU summit at the weekend put out lots of words but little policy action. In particular it rejected a large loan package for Eastern Europe proposed by Hungary. Swedish Q4 08 gdp fell 4.9% year-on-year, twice the rate of decline expected. Sweden, Finland and Austria are probably the developed European markets most exposed to Eastern Europe's problems.

Phobe, sorry if you think I mention Canada too little: it's doing quite well in the downturn, as you know, and therefore tends not to be headline material .

Edit: link to AIG results comment http://news.bbc.co.uk/1/hi/business/7918643.stm

Some capitulation going on: Wall Street ended 4% down after the AIG number. Latin America was down a typical 5% with Argentina down 7%. Overnight Asia is up 1% after initial falls and Europe is also up around 1%, having absorbed the US initial drops before closing yesterday. The US dollar is back to recent highs against the Euro and yen.

Korea is starting to see some benefits of its currency weakness. Intel has decided to outsource the Atom processor line to TSMC. Exports were only (only!) down 17% year-on-year in February after January's -34%. Industrial production was up in January compared to December by 1.1%.

US consumer spending rose 0.6% month-on-month in January, ending a seven-month decline, on lower mortgage and oil costs. Personal income rose 1.7% on a 9.3% decline in personal taxes, allowing the savings ratio to rise to 5.0%. Canada's Q4 08 gdp declined an annualised 3.4% quarter-on-quarter and rates there are expected to be cut 0.5% today (special entry for Phobe). Australia did not reduce its interest rates today, against expectations, and retail sales rose 0.2% in January. The Aussie economy is proving relatively resilient so far.

Any thoughts on the Sage's annual shareholder letter...

He's another one of us waiting for reality to catch up with the video game.

Originally Posted by oldfogey

He's another one of us waiting for reality to catch up with the video game.

I was gifted his new book for Christmas, it was a pretty good read surprisingly.

Originally Posted by Baketech

Any thoughts on the Sage's annual shareholder letter...

I am still debating using one of his one liners as my sig:

Beware of geeks bearing formulas.

Page 17 provides a nice historical context.

Thanks for the comment, I didn't realize it was out yet.

Bernanke blasts AIG management for exploiting regulatory gaps and causing huge problems. Who blasts the regulator for allowing the gaps?

US car sales in February down 41% to 9.1m, 1981 levels, but stocks are 5.5x sales compared to the average 2.5x over the last ten years, so production has still to adjust fully. Ford's sales were down 48%; its F-series 55%; Toyota down 41%; Hummer 69%; Mercedes 24%, all year-on-year. GM's European subsidiaries need $4.2bn by April and will cut 3,500 jobs immediately, its CEO says, pressurising the Swedish, German, British, Spanish and Belgian governments over requested loans to keep European factories open. Most governments see no sustainable business model and are reluctant to offer more than transition support.

Australia's Q4 gdp fell 0.5% quarter-on-quarter and rose 0.3% year-on-year. Bank of Canada did indeed cut rates 0.5% to 0.5% yesterday. China's PMI index rose from January's 45.3 to 49.0 in February, close to a flattening of growth after a period of contraction. Further reflationary measures are expected tomorrow from China, and loans granted by the banking system in January and February equalled half of the total loans granted in 2008, a very sharp contrast with the developed world. Indonesia lowered its interest rates 0.5% to 7.75%.

Edit: I forgot the market moves! US marginally down yesterday, Latin America +/-1%, China up 6%, Japan up 1%, Australia down a little, Europe 1-2% higher at midday.

http://www.berkshirehathaway.com/letters/2008ltr.pdf

For those who didn't know where to find it.

Originally Posted by oldfogey

Who blasts the regulator for allowing the gaps?

I realize I was yelling at the television yesterday...but had no idea just how loudly....

Wall Street up 2.5% yesterday, Latin America strong, up 6% in Argentina and 5% in Brazil. Asia generally 1-2% higher, but Europe down 1% or so this morning.

Chinese Premier Wen did not quite meet market expectations of new package announcements, but did announce a planned government deficit of 3% of gdp that probably will turn out to be 4% and the detail included more official spending plans and tax cuts. Rate cuts are expected from the UK and the European Central Bank today.

UK PMI rises to 43.2 in February from 42.5. UK house prices fell 17.7% year-on-year in February. US payrolls fall by 697k in February. India cuts official rates by 0.5% to 5.0% (repo).

Taiwan creates a government company, Taiwan Memory Company, to consolidate six failing companies in the sector: Bloomberg.com: Asia

Ford plans a buy-back on $8.9bn nominal of its debt, for which it proposes to pay $1.3bn, a 55% premium on market prices.