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<a href="http://realestate.yahoo.com/promo/renting-makes-more-financial-sense-than-homeownership.html">Renting Makes More Financial Sense Than Homeownership</a>



Now they tell us [smacks forehead]
 
<span style="color: red;">OMG, Congress did something right for once...</span>





<a href="http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/financial_meltdown">House ignores Bush, rejects $700B bailout bill </a>



"No" votes came from both the Democratic and Republican sides of the aisle. <strong>More than two-thirds of Republicans and 40 percent of Democrats opposed the bill.</strong>
 
<a href="http://clerk.house.gov/evs/2008/roll674.xml">House vote record for bailout bill</a>.



This isn't over. Despite the voting record, the Democrats have enough votes to pass it on their own. It doesn't matter that voters hate it, it doesn't matter that the plan is flawed and has little chance of success, it doesn't matter that it completely fails to address the root cause. All that matters is that the President, House leadership, Senate leadership, and major media outlets want this; a bailout will be passed unless there is absolutely no doubt that they will made private citizens on November 4th.
 
Just to think that in the recent past, 91-day T-bills were yielding higher than any bank's short term CD or savings account. I still have my TreasuryDirect account. Lotta good that's doing me today... :-(
 
[quote author="effenheimer" date=1222748424]Just to think that in the recent past, 91-day T-bills were yielding higher than any bank's short term CD or savings account. I still have my TreasuryDirect account. Lotta good that's doing me today... :-(</blockquote>


No kidding...the yield on the 3-month Treasury bill is at 0.46 percent...
 
Whoa.



From CR: <a href="http://calculatedrisk.blogspot.com/2008/09/libor-hits-all-time-high-of-688.html">"LIBOR Hits All-time High of 6.88%"</a>



Obviously this has wide ranging implications, but for people with an adjustable rate that resets on October 1st, they are screwed. Those loans are likely going to reset (recast?) to the max rate, if any.



Later edit: I completely forgot that nearly all the letters of credit I worked with in a previous life - issued by banks to small business owners to finance new manufacturing facilities and/or equipment - were all based on LIBOR and reset <em>monthly</em>. :ohh: I wonder how many of those are going to have to be renegotiated and/or refinanced, lest the BK courts get even more busy.
 
[quote author="EvaLSeraphim" date=1222810227]Whoa.



From CR: <a href="http://calculatedrisk.blogspot.com/2008/09/libor-hits-all-time-high-of-688.html">"LIBOR Hits All-time High of 6.88%"</a>



Obviously this has wide ranging implications, but for people with an adjustable rate that resets on October 1st, they are screwed. Those loans are likely going to reset (recast?) to the max rate, if any.



Later edit: I completely forgot that nearly all the letters of credit I worked with in a previous life - issued by banks to small business owners to finance new manufacturing facilities and/or equipment - were all based on LIBOR and reset <em>monthly</em>. :ohh: I wonder how many of those are going to have to be renegotiated and/or refinanced, lest the BK courts get even more busy.</blockquote>


Two questions: How does this affect those getting loans for home purchases right now? And doesn't LIBOR spike at the end of the month, every month, and then calm down again at the beginning of the next month? Myabe this is a bigger than usual spike?
 
6 month LIBOR used for mortgages, 3 month LIBOR used for businesses/warehouse lines, and the 1 month LIBOR used for... I dunno, maybe nothing other than over night bank to bank lending. These spikes have to stick around for some time before they make the 6 month and the 3 month spike. I'm not saying it can't happen, because it looks like it could head that way, but it could chill out too.
 
[quote author="awgee" date=1222811229][quote author="EvaLSeraphim" date=1222810227]Whoa.



From CR: <a href="http://calculatedrisk.blogspot.com/2008/09/libor-hits-all-time-high-of-688.html">"LIBOR Hits All-time High of 6.88%"</a>



Obviously this has wide ranging implications, but for people with an adjustable rate that resets on October 1st, they are screwed. Those loans are likely going to reset (recast?) to the max rate, if any.



Later edit: I completely forgot that nearly all the letters of credit I worked with in a previous life - issued by banks to small business owners to finance new manufacturing facilities and/or equipment - were all based on LIBOR and reset <em>monthly</em>. :ohh: I wonder how many of those are going to have to be renegotiated and/or refinanced, lest the BK courts get even more busy.</blockquote>


Two questions: How does this affect those getting loans for home purchases right now? And doesn't LIBOR spike at the end of the month, every month, and then calm down again at the beginning of the next month? Myabe this is a bigger than usual spike?</blockquote>


1. I don't know. Some rates like the 30 year fixed loans, correlate to the 10 yr Treasury, but I have seen some 5/1 ARMS and others that reset/recast to LIBOR plus a certain amount (e.g., LIBOR plus 4%). I don't know if the starting rate is connected to LIBOR or not. Perhaps Lending Maestro (that guy with actual and current mortgage experience, as opposed to my partially informed blathering) could chime in?



2. I don't know. I haven't really tracked it. If it does spike, my sense is that this is a bigger spike than usual. <a href="http://bigpicture.typepad.com/comments/2008/09/all-time-high-o.html">Barry at The Big Picture has a nice chart.</a>



<img src="http://bigpicture.typepad.com/comments/images/2008/09/30/libor_5_years.png" alt="" />
 
Just in case anyone forgot; house prices are still falling...



<a href="http://www.msnbc.msn.com/id/26955274/">Home prices tumble by sharpest annual rate</a>



NEW YORK - A closely watched index released Tuesday showed U.S. home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing.



The Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3 percent in July from the year-ago month, the largest drop since its inception in 2000. The 10-city index plunged 17.5 percent, its biggest decline in its 21-year history.



Prices in the 20-city index have plummeted nearly 20 percent since peaking in July 2006. The 10-city index has fallen more than 21 percent since its peak in June 2006.



No city in the Case-Shiller 20-city index saw annual price gains in July, the fourth straight month that's happened.



However, the pace of monthly declines is slowing, a possible silver lining. Between May and July, for example, home prices fell at a cumulative rate of 2.2 percent ? less than half the cumulative rate experienced between February and April.



But there's "no evidence of a bottom," said David M. Blitzer, chairman of the index committee at S&P.



Las Vegas prices plunged the most at nearly 30 percent, with Phoenix diving 29 percent and Miami, 28 percent. Prices in the seven cities in the Sunbelt all fell between 20 percent and 30 percent from a year ago.



Only seven cities showed positive or flat returns from June to July, down from nine that showed month-over-month gains in June. Atlanta, Boston, Dallas, Denver and Minneapolis all posted positive returns for three months or more.
 
Daily/weekly/monthly swings in LIBOR may or may not have an impact on your mortgage. A typical 3, 5, 7, or 10 year ARM carries a fixed rate during the predetermined period. At the point of first adjustment, the rate is based on the predetermined margin plus the current index value.



Many LIBOR-indexed ARMS were 3/1, 5/1, 7/1, and 10/1 ARMS. The "/1" simply means the rate adjusts once a year, every year thereafter. This means that the only time LIBOR matters is annual date that your mortgage readjusts. If today is your adjustment day you are in for pure hell. If your rate adjusted a few days/weeks ago you probably aren't in too bad shape rate wise.



If you have a pure monthly adjustable mortgage then your rate is much more susceptible to volatile swings.
 
<a href="http://news.bbc.co.uk/1/hi/world/europe/7635327.stm">French hold out against credit crunch</a>



Unlike Britain, the US and many other countries, France appears to be weathering the credit crunch storm in reasonable shape.



The BBC's Emma Jane Kirby asks if other nations should take a leaf out of the thrifty Gallic book?



In France, it is very difficult to spend money you do not have



If I had to use one word to describe France's financial system, the word I would choose would be "cautious".



French banks are immensely careful about whom they lend money to and, to limit risks, they spread their investments much more widely than those in the US or UK.



Only about a quarter of banking activity is related to investment banking and dealer-broker activity - the rest is all to do with retail banking.



This meant when the credit crunch bit, the French banks were hit a lot less hard than those in many other countries.



But it is not just about banking investments - this country as a whole simply takes far fewer risks.



In London... it was as if wealth was something you could get from a bank, it's a sort of miracle people seem to believe in England



Francois Artignan, banker



Take the level of household debt. In France, it is at 47% of GDP, while in the UK it is well over twice that.



It's not that temptation does not exist in France - the lure of consumerism is just as strong as it is elsewhere.



But it is very difficult to spend money you do not have in France.



French credit cards are little more than debit cards, so there is no question of simply sticking a couple of flat screen TVs on your credit card and hoping to pay for them later - if there are insufficient funds in your account, your bank will immediately block the transaction.



In the wealthy suburb of St Germain-en-Laye, just outside Paris, I met Francois Artignan, a well-to-do banker who moved back to France two years ago after a long stint of living in the UK.





Mr Artignan was 43 when he bought his first house in France



Francois admits he misses the buzz of London living but says he was alarmed by the way so many British people lived on their credit cards and never saved money.



"It's true that you can note a big difference in consuming behaviours between the French and the English," Mr Artignan says.



"People here don't believe you can just put your debts together and get them refinanced... But in London... it was as if wealth was something you could get from a bank, it's a sort of miracle people seem to believe in England.



"It seems to me people there are very keen to use up all the money they have, and that's a worry when you wonder how people are going to have money for retirement for instance," Mr Artignan says.



Sluggish growth



From his Paris office, the chief economist for market analyst Xerfi, Alexander Law, has been comparing the spending patterns of France and Britain.



A loan for a mortgage is impossible without a big deposit



Mr Law, who has dual nationality, believes that innate French prudence has saved it from disaster.



"Generally in France you spend what you have and not more," he explains.



"In the US and the UK, the economy has been driven by household spending, consumption has been driven by credit, and a lot less in France, so that's why when there were periods of expansion France grew a lot more slowly than the UK and the US but conversely when it's slowing down, it will slow down in a more moderate fashion than the UK or the US."



France's rate of growth is horribly sluggish - this year it looks set to hover around just 1%, meaning its likely to be way off target for meeting its promise to the EU to bring its budget deficit back under control by 2012.



But although its slow economy is hardly the envy of the world, its reluctance to tie its economy into the housing market in the same way the US did has also meant that when the American sub-prime market collapsed, it did not drag the French market with it.



There are far fewer household owners here than in the UK - about 57% of French people are on the property ladder, compared to 70% in the UK.



Although a high earner, Mr Artignan was 43 before buying his first home because in France, unless you have a big deposit, you can forget begging the banks for a huge loan.



Two conditions



President Nicolas Sarkozy is trying to push France into becoming a nation of house owners by building thousands of cheap new homes.



Thousands of new cheap houses are being built across France



But France still believes in strict rules and regulations, Finance Minister Christine Lagarde says.



"Expect two conditions - a down payment of 20% of the value of the house plus mortgage [repayments] which will not exceed 30% of income.



"You already have a pretty good safety net there and clearly no real estate financing similar to the sub-prime market that has existed in the US and which has hurt the financial system so much," Ms Lagarde says.



France has long been feeling the pinch of the global rise in food and fuel prices and many people here complain that their spending power is falling fast.



In France, 46% of people chose to stay home for their summer holiday this year rather than splashing out on an expensive break away, and so many people are cutting back on dining out that some 3,000 cafes and restaurants went out of business in the first three months of this year.



Ms Lagarde says many people are living in the "world of fantasy"



Sparse spending means sparse growth - but should other countries take a leaf out of the parsimonious Gallic book?



"I'm not suggesting that we have the basic principles right, I'm not suggesting that we can teach the world lessons," Ms Lagarde says.



"But I think it will be for each and every category of players, traders, regulators, supervisors, to examine what they have done, what they should have done and what they should be doing in the future to bring a bit more morality into the system.



"I think we have let this world of fantasy and virtuality overcome reality... There have to be more principles, more discipline and a bit more reality," the minister says.
 
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