JayB

The best part of the boomtime-condo equation is that you get a share of liability for the entire structure. Yipes.

Depends on how much money/time/effort their owners are willing to sink into them, I suspect. Most of that will be determined by variables beyond those associated with the construction of the houses. I suspect that there are literally thousands of well-constructed homes rotting on their foundations in Michigan, Buffalo, etc. There are also a bunch of homes in Seattle that were probably thrown together with cheap material and slipshod labor during the post WWII boom that have held up better than anyone building them would have thought possible, thanks to the fact that Seattle is home to a high concentration of relatively prosperous people who are willing to pay a ~$300,000 premium to spend less time in traffic-hell. I'd have to agree that most macro trends are unfavorable for the McMansion. I also suspect that we'll see whole subdivisions on the periphery of the commuter-zones near the hardest-hit metro-areas rendered uninhabitable, and demolished before this thing is over.

I think I get it, maybe not. I guess my question in this scenario is where is that demand going to come from? In real life...you know like, not from a diagram. If the economy's in the shitter and no one can get a loan no matter how good their credit/income/savings look per traditional lending guidelines (20% down, fixed), then most of the buyers will be either rich people or institutions. If people with the right credit/income/savings profiles can borrow 70-80% of a home's price at rates below 15% then the buyer mix will shift towards people who have to work for a living. In the long-term, if demand returns to something like a pre-bubble equilibrium, most of the rich people/institutions that own residential properties will probably take their profits and invest them someplace else, where they can get a better return. It's notoriously difficult to achieve profits, let alone decent returns by owning and managing large numbers of single family homes. Very expensive and time consuming relative to the cash flow they generate, and they tie up capital that could earn better returns elsewhere. This is one reason why the big-boys tend to stick with apartments and commercial properties and the concentrations that you speak of have never materialized.

I totally agree. We need to protect our assets from foreign takeover but at the same time I think this country needs a hard lesson that as individuals, companies, and government that we can't live off of credit and loans, especially when an increasing amount of our money is leaving. what about american companies taking over firms in europe , s america or asia? free market means everyone competes with everyone. Yup. We're in no position to refuse capital infusions from private entities, wherever they may be from.

God knows if there's been one person on this board that's been an unrepentant cheerleader for the current status-quo when it comes to every component of the real-estate market, from appraisal to securitization, it's been me. Ditto for the sustainability of the price run-ups relative to income and asset growth, the incentives that lead to plowing staggering amounts of capital into McMansions and granite countertops instead of productive assets, etc. Anyhow, I'll try to respond. -Bailout: Has to be structured so that any bank that reaches for that life-ring gets coughs up an ownership stake equal to the dollar value of the welfare check that Uncle Sam cuts them via the issue of warrants or subordinated debentures that the government can subsequently sell. Determining what to pay for the distressed assets should involve an auction mechanism that's open to private bidders. Re-capitalizing banks by simply overpaying for bad assets is a very bad idea for a number of reasons. A ground up bail-out of overextended homeowners would cost more, take more time, and be less effective IMO - but the idea is roughly the same. -Mortgage lending: The bad regulations that metastacized into the current nightmare when combined with loose monetary policy and mass-psychology predate the current administration. Reform had very few friends on either side of the aisle before the bubble popped. Fannie and Freddie seem to have had more friends willing to stifle reform on the Democratic side, in the name of "affordable housing" since at least the early '90s. If you've got evidence to the contrary, feel free to share it. -Various actors in the real-estate market/existing regulations/incentives/subisidies: You won't find me defending them. -Housing vs Investments: When sanity prevails, most houses are a wash, financially - after you account for taxes, interest, insurance, maintenance, upgrades, etc. If you can rent the same property for less than the total price of owning and have the discipline/knowledge required to invest the savings in a diversified portfolio for as long as the rent vs own disparity exists, I think you'll wind up with more money and more piece of mind than if you'd purchased the same property in most market environments. If you are like most Americans, you should probably just buy a house and cross your fingers. -Home Ownership percentages: The more prices fall, the more willing buyers there'll be. If the total cost of owning approximates the cost of renting, or drops beneath it, there'll be buyers of one kind or another. If lending is tight, the first round of buyers will probably be those who have lots of cash and intend to rent them out. If lending returns to some kind of sanity in the wake of this debacle, a significant percentage of those post-bottom buyers will be individuals with savings and good credit. I'd like to think that there are as many of these people out there as there are lemmings/retards and get-rich-quick schemers, but I'm not aware of any stats that would help prove or disprove this assumption. Question for Buckaroo: -Any idea what differentiates the particulars of the home-price bubble in the US from the property bubbles in Spain, Ireland, England, New Zealand, Canada, Australia, Russia, China, etc? Seems a bit much to hang on the Republicans, IMO.

Worked like a charm for Fannie and Freddie. I'd be more than happy to see the folks here dissect exactly who argued against reforming that case study of moral hazard every time it's come up - ever since the Johnson administration "privatized" Fannie in order to get it's balance sheet off of the country's books.

The break up of ATT occurred in spite of people like you who despite what they may say never agree to breaking up monopolies. And, as far as I can tell I am posting via cable managed by another quasi-monopoly. So you'd recycle ad-infinitum your silly one-liners like the above and I'd give you a history lesson? Yes. Speaking of history lessons, it might be useful to revisit the saga of the Corn Laws, back in the days before "liberal" and "leftist" meant two entirely different things. At some point in mid-nineteenth century England came to a couple of conclusions concerning the production and sale of corn within the Kingdom. Back then - the Crown determined who could grow and sell corn, and either forbade the import of corn or permitted the folks who grew the corn to do the same. I can't recall the precise mechanism the crown used to distribute these rights - but I suspect they were either sold for cash or distributed for political favors. Worked like a charm. Eliminating competition meant the large landholders would pay the crown more for the right to grow corn under monopoly conditions, and those who secured the monopoly rights didn't have to fret about competition diminishing their profits. The only people it didn't work out so well for were the consumers of corn, who would have been considerably less hungry, and/or starvation or death if they had been able to buy twice as much corn with the same amount of money. Given that hunger and/or starvation were acute realities in those days, there was quite a bit at stake - at least for the hungry and starving. It's been at least a dozen years since I read their essays, so the particular arguments are a bit difficult to recall, but they all seemed to agree on a couple of points. The first was that it was neither ethical nor just for the crown to use its power to grant monopoly concessions to enrich themselves and the large landholders at the expense of the poor and the hungry. The second was that a constraint on the right to buy corn from whomever they chose was a profound a violation of the rights and liberties that centuries of Englishmen had fought and died to secure - no less so than the crown dictating who they could and could not speak to, etc. I'm still waiting to hear the array of industries that will constitute your pean to the glory days of corporatism, but the gist of your arguments seem to be that consumers were much better off when the government prohibited competition using one mechanism or another. Whether it's corn or cars, when the government shields one company or sector from competition, the consumer invariably pays more and gets less than they would if the government wasn't playing favorites. There's no escape from this. In your fond remembrances of the days when people had to fork over a week's pay to speak to their grandchildren for five minutes, or could behold the glory of the cracked engine block on their new car and know that at least they'd been spared the agony of paying less money for a more reliable vehicle made by foreigners..etc, etc, etc...Spare me the pretend argument where anyone arguing for open competition without the government playing favorites is arguing against any rules in the marketplace. Suggesting that we're all better off when the laws that govern behavior in the marketplace apply equally to all participants is all I'm doing here. If you want to pretend that this means retreating into some kind of left-wank-fantasy Hobbesian state where the department of weights and measures, the enforceability of contracts, and patents all get tossed out with the Ethanol subsidies, you'll have to find another participant.

Sick. Both parts of this duo consistently set the action/talk bar mighty high. Looking at the photos is a vivid reminder of how much credit the original crew deserves for pushing into the unknown.

Quite a few banks have (IndyMac, etc) have and will gone under as a simple consequence of making bad loans. What concerned me quite a while ago was WAMU's origination/retention of risky mortgages in overpriced markets, the amount of HELOC debt that they were on the hook for in the same markets, and the percentage of their earnings derived from the additional interest accruing on their neg-am/pay-option portfolio. I have zero formal training in balance sheet analysis, but it looked like an ugly enough picture a couple of years ago that I encouraged anyone that I spoke with who owned the shares (all of a couple of people) to consider selling before the Great ARM Reset got underway. Maybe you could provide a link to an analysis/analyst that you think got it right?

Uno Mas. "September 11, 2003 New Agency Proposed to Oversee Freddie Mac and Fannie Mae By STEPHEN LABATON The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios. The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates. ''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan. Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies. The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws. The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session. After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall. ''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies. ''These irregularities, which have been going on for several years, should have been detected earlier by the regulator,'' he added. The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios. At the time, the companies and their allies beat back efforts for tougher oversight by the Treasury Department, the Federal Deposit Insurance Corporation or the Federal Reserve. Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. This year, however, the chances of passing legislation to tighten the oversight are better than in the past. Reflecting the changing political climate, both Fannie Mae and its leading rivals applauded the administration's package. The support from Fannie Mae came after a round of discussions between it and the administration and assurances from the Treasury that it would not seek to change the company's mission. After those assurances, Franklin D. Raines, Fannie Mae's chief executive, endorsed the shift of regulatory oversight to the Treasury Department, as well as other elements of the plan. ''We welcome the administration's approach outlined today,'' Mr. Raines said. The company opposes some smaller elements of the package, like one that eliminates the authority of the president to appoint 5 of the company's 18 board members. Company executives said that the company preferred having the president select some directors. The company is also likely to lobby against the efforts that give regulators too much authority to approve its products. Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ''responsible proposal.'' The stocks of Freddie Mac and Fannie Mae fell while the prices of their bonds generally rose. Shares of Freddie Mac fell $2.04, or 3.7 percent, to $53.40, while Fannie Mae was down $1.62, or 2.4 percent, to $66.74. The price of a Fannie Mae bond due in March 2013 rose to 97.337 from 96.525.Its yield fell to 4.726 percent from 4.835 percent on Tuesday. Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators. ''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.'' Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing. ''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' Representative Melvin L. Watt, Democrat of North Carolina, agreed. ''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said." http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print

Posting from a rotary phone that you've leased from AT&T? No? Bore me with examples.

I'm calling bullshit on that. Unless you're saying that the millions of Americans who've had their home foreclosed are going to turn around and get loans to buy another home, we're looking at a whole generation of American renters, new concentrations in real estate, and a new class of parasites to administer it. Remember those property management bastards you had to deal with as a college student? That's the future of American housing. The decline in home prices will probably bring at least as many people into the market for homes as foreclosures eject from them, so I don't expect net home-ownership percentages to drop substantially over the long term. As an aside, there's no convincing data to support the notion anything inherently negative about renting, especially when you can do so for considerably less than it would cost to cover the mortgage, taxes, insurance, and upkeep on the same property. The financial and social benefits of home-ownership have been vastly overstated. As far as the folks being foreclosed on are concerned, I don't think that many of them will be able to shoehorn their way into a 105% LTV neg-AM, I/O, pay-option-ARM for a property that's 8X their gross-income ever again in their lifetimes, which is a net positive for all concerned. After home-prices mean-revert to the point where their rental yield covers the cost of owning them, they'll probably be able to qualify for a loan at 2-3X their gross income if they can muster the discipline necessary to save the 20% downpayment that any sane lender should require of them before approving the loan. Those that can't will be substantially better off renting, whether they realize it or not.

Nah, not as long as the jesuit economists and their alcolytes in the business press can still filibuster us to death with ahistorical technojargon, right? During the next couple decades of re-regulation we can look forward to the remaining true-believers whine about the misapplication of "sound market principles" or failure to "go all the way" as the explanation for the current crisis (their IMF clergy members will have had plenty of practice from South America) on the one hand. On the other we can expect to hear how reregulation is doomed to failure and totalitarianism is right around the corner. Your dustbin awaits fellas, filed right next to "the end of history". Unhappily, as a result of the failure of their misguided doctrines the next phase of global capitalism is likely to have a strong authoritarian flavor. Don't think the American technocrats watching the Chinese Olympics weren't wondering "what the hell's so great about democracy anyway?" I suspect that we'll arrive at rather more prosaic remedies to the regulatory shortfalls that have given rise to the present crisis. At the end of the day, imperfect as it may be, there's no mechanism other than prices that enables the coordination of supply and demand, and the allocation of capital in a way that responds to the prerogatives of reality than the price system. You can slap a new body on the engine and tweak the controls, but nothing else will work. Reality is too complicated, and the future too uncertain for a centralized bureaucratic mechanism to do anything but fail. This should be obvious by now, even to people who take Naomi Klein seriously.

We'll be in the central plateau in NZ, and probably won't be able to get away for more than 3-4 days at a time - so the climbing will probably be confined to whatever cragging's available in those parts, and some of the local volcanoes. Probably pegs the weak-and-lame-o-meter from a climbing standpoint, but the overall rationale for the trip is about the same as the stay in the Icicle. Flowers and bunnies and rainbows...

I've only read some of his stuff, but I don't think that you'd be too far off the mark if you read "A Supposedly Fun Thing I'll Never do Again," in a short-story collection with the same title, or "Mr. Squishy" in another short-story collection entitled "Oblivion: Stories." If you read through some of the stuff in either collection and it appeals to you, then "Infinite Jest" will be worth plowing through for sure. I read that one about 11 years ago, so I can't recall all of the details but the basic plot-line is as follows: All of the countries in North America have coalesced into a homogenous mega-state and are know organized into something called the Organization of North American Nations (O.N.A.N. for short). The boundaries between political life and commerce have become so blurry that the rights to calendar years have been sold to corporate sponsors (which leads to chapters with time/date headings that read "June 14, Year of the Trial Sized Dove Bar"), and the populace has largely abandoned any pursuits other than those that revolve around momentary amusement and supine leisure. The only holdouts against the encroaching commercial homogeneity are a band of burly Quebecois terrorists (many of whom also seem to be parapalegics) who dress in Hawaiian garb to symbolize their status as a unique subculture about to be subsumed beneath an the encroaching homogeneity of the larger culture. When they discover that a half-made American film-maker has created a movie so entertaining that all who view it fall into a trance like state in their barcoloungers and can no longer stir themselves to eat, defecate, or any other vital functions they embark on a quest to get their hands on the cassette and distribute it via the Interlace entertainment network and get the megaculture to implode when its citizens OD on the fix they've spent most of their lives in pursuit of. For some reason, most of the action revolves around characters in a 12-step program and an elite tennis academy. Some of the reading required a bit of will-power and stamina, and I had to keep a dictionary on hand as I was reading it, but some of the passages were so vivid and hillarious that I still laugh when I think of them ten years later. In hindsight, some of the major plot themes seem prophetic in hindsight.

And how many billions the fed will lend to other businesses. Ahh.... Exactly.. aren't the American automakers asking for something like $50bil? The funniest thing about this is that when they claim that they *need* public money to finance their retooling, they are more or less conceding that the money that these investments generate won't be sufficient to repay the debts. If it was, they'd be able to get private financing.

A bit for hiking and fishing, but not for climbing. Injuries, and the fact that we've been out of the alpine-climbing-as-a-couple game for a few years made cragging a much more pleasant option for all concerned. Was more of a "shake off the East Coast and relax" trip than a hard-charging climbing trip, so reading, drinking, chilling with friends and family sort of trip - with a ton of fly fishing and a few days worth of kayaking mixed in, but the cragging that we did was pretty sweet. We'll probably do some moderate snow-hike type Alpine stuff in New Zealand while we're their, and get back in the NW alpine groove a bit when we get back next summer.

More foreclosures, yes - absolutely. The Prime ARM/Option-ARM reset cycle is just getting started, and the dollar-value of these loans equals or exceeds Teh Suprime. The magnitute of the credit contraction, and the number of bank failures that the second phase of the great real-estate cluster brings about is likely to be significantly greater than Teh Subprime gave rise to, since the amount of money that the folks who hold these loans set aside to cover losses on the said loans is way smaller than what they socked away to cover the carnage in their subprime portfolios. However - I don't expect the number of slumlords to increase unless someone institutes rent controls, or other measures that guarantee that rental yields can't cover the total cost of owning the units that the bottom feeders buy at foreclosure auctions. You may, however, take some comfort in the fact that the distinction between "bottom-feeder" and "knife-catcher" will be a rather fuzzy one for quite some time. The only unknown is how many billions of dollars in welfare payments that the government will shell out to homeowners in an effort to put an artificial floor under prices. As far as I know, they're out there bidding-down mortgage rates in the Ginnie/Freddie debt markets at this very moment.

http://www.guardian.co.uk/books/booksblog/2008/sep/15/david.foster.wallace.brilliant.talent Very sad indeed.

When you finance highly leveraged "long" positions in illiquid instruments with short term borrowing, you're pretty much toast when your access to short-term credit dries up. When the highly illiquid instruments happen to be composed of mortgages that both exceed the borrower's capacity to repay them, and the value of the properties that they were used to purchase - that drying up was just a matter of time. Pretty much the same story for every financial firm that's gone under or been bought out thus far, including FNMA and Freddie Mac. Things won't bottom out until the underlying assets - houses and condos - find prices at which the rent they can generate will cover the debt required to purchase them. We're still a ways away from reaching those price levels IMO.

Just thought I'd briefly chime in to say that I read "Misquoting Jesus: The Story Behind Who Changed the Bible and Why" while spending a month camped out in the Icicle, and think that the book would be an interesting read for all participants in the thread. http://www.amazon.com/Misquoting-Jesus-Story-Behind-Changed/dp/0060738170 The incontestable fact that the modern scripture is a compendium of insertions, deletions, mistranslations, and outright inventions probably won't trouble most Catholics, since in some ways strenghten's the Church's argument for the use of accumulated scholarship and tradition to serve as a translator or intermediary between god and man. I can't help wondering, though, how this would affect anyone who purports to believe that the bible is the infallible word of god. Seems like this would present some challenges even for those who are more given to the "personal relationship with god" variant, since combining a fallible text with fallible reason exculdes virtually nothing from the spectrum of beliefs that might constitute "true" Christianity. Interesting stuff.

Had Palin encouraged her daughter to get an abortion on the sly to further her own political ambitions, I think the case for hypocrisy would be rather more potent. I'm with Eric in that I don't see any hypocrisy evident in the Palin family's actions here at all, for the reasons he outlined above. I think that you could also extend much of the same defense to large swaths of the religious right when the question at hand is what they'd choose when the scenario in front of them involved choosing between a pregnant daughter bringing the pregnancy to term or the same daughter having an abortion in secret. I personally think that "abstinence only" education is a bizzarre experiment against reality that is statistically certain to generate both more teenage pregnancies and abortions, think it does a profound disservice to the teens its supposed to help, that Bill Clinton's "Safe, legal, and rare" formula was the right goal to shoot for with respect to abortions - but just don't think that charges of hypocrisy are especially warranted in this case. The charges are more apt when it comes to folks on the Right expressing shock and dismay at the fact that their political opponents are seizing on the Palin pregnancy for political advantage, since they'd be doing the very same thing. Quite amusing for anyone on the Left to pretend that they'd do otherwise, or that this is shortcoming that's unique to their political opponents.

Rockered skis seem like a cool idea - but the reality is that pretty much anyplace where I'd be likely to ski with them will be pretty well tracked out by noon - even on a weekday. How do they handle when they're not in the pow?

I think you've got the right idea, Mark, and I'm generally of the same mind that you are when it comes to people monopolizing routes - but I think that the reality is that on crowded weekends at popular destinations you've to to do a bit of compromising and communicating. If the TR siege mentality is clearly going to prevail in a given area, the reality is that you aren't going to get as much leading in as you might like, but most of the people that I've asked have been willing to share their rope, or at least swap ropes when I've asked. I also think that if you make a bit of small talk with the folks in the midst of TR-sieging and then mention that you're excited about leading the route when they're done, they'll at least cycle folks through a bit more quickly.

Sweet! Brought back some memories from my own trip up there in early June of '05. Last trip in the Cascades before the three year sentence/exile commenced. I was wondering how things were going over there smoke wise, as we looked on from Condor Buttress in the AM, where things went from late-70's Vegas-Lounge air-quality to nice and clear in the space of a couple of hours when the wind changed directions. Hot(!) Out there this weekend. The heel-rubber on my old pair of 5.10 Ascent's started to melt off on the descent...