Headlines...

NEW -> Contingent Buyer Assistance Program
<p>I think ghey dancing spidey was too hypnotic for the undercaffeinated of the IHB'ers.</p>

<p><img alt="" src="http://www.smugmug.com/photos/9224564-O.gif" /></p>
 
<p>My sock is currently being held for ransom by Comcast's "upgrade" to their personal web pages. I'd host it elsewhere, but then I'd be deprived of a legitimate reason to call Comcast and execise my considerable vocabulary of profanity.</p>

<p>It's the simple pleasures that makes life enjoyable.</p>
 
<p>On the way up, normal people who simply wanted to buy a house, and were not experts on this stuff got caught up in the mania.</p>

<p>People asked me at these closings, did I think house prices in South Florida were going to continue to go up? I said first, I have no crystal ball, second in the very long term, yes prices were going to go up, because it is really true that in Miami Dade County, we are hemmed in by the ocean and the Everglades, and heavily developed Broward County on the north and the Keys in the South. Nowhere to go but up in highrises. But, I said, you have to be able to hang on in the short run.</p>

<p>So people knew they were taking a risk. But they did not know how much risk, and houses, except for one short period in the 1980s had appreciated non stop for over 60 years. So the quite logical conclusion was that you had to jump on the train at some point or you were never gonna afford to buy a house.</p>

<p>I haven't changed my mind, except that the long run is more years than I previously contemplated. And the years necessary to hang in there to make a profit is much much longer that I had ever imagined.</p>

<p>So the moral hazard is really there. But I don't think that homeower bailouts are really going to be that much worse for the buyers than what is going on now. Now, virtually nobody can get a loan. My broker buddy has a number of deals on his desk, and none of them are stinkers, at least one involves a 50% loan to value ratio. He can place none of them; I suppose potential lenders think values have or will shortly drop 50%.</p>

<p>And I don't think some suggested bailouts will be that much worse for the lenders even. If those rotten loans are taken onto the balance sheets, many big banks will be technically insolvent. </p>

<p>If gov't interferance with contracts slices and dices imaginary profits, well, at least the banks can say to their investors, that the devil/gov't made me do it.</p>

<p>Loathesome and stupid tho the banks are, it does nobody any good to take down the financial system.</p>

<p>Oh, and all this goes away if we have a late season hurricane, which destroys a bunch of housing units. Andrew destroyed 80,000 housing units (including mine). I have heard realtors wishing for a storm!!!</p>

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<p>Wall Street reaction to M-LEC is mixed. "Many investors and analysts describe the fund as a stopgap that will relieve some pressure but not address more intractable problems with mortgage securities held by the structured investment vehicles..."</p>

<p><a href="http://www.nytimes.com/2007/10/17/business/17credit1.html?_r=1&ref=business&oref=slogin">NY Times story</a></p>
 
lawyerliz - My take is that the lenders would like to make the loans. That is what they are in business to do and is how they make a living. But the lenders can't make many loans because the secondary market can not buy their loans. It is not that the secondary market does not want to buy good mortgage paper, but rather they can't. They can't because the paper they are presently holding is leveraged and they are getting the equivalent of margin calls and are getting ready to pay the other said of a whole lot of credit default swaps. No one wants to take down the financial system. They are just trying to survive. And survival at this point means trying to keep what little liquidity you have. If your reserves are dissapperaing you can't just go out and buy more paper.
 
<p><strong>Jobless Claims Rise Sharply Last Week</strong></p>

<p><a href="http://www.forbes.com/topstories/home/feeds/ap/2007/10/18/ap4234761.html">http://www.forbes.com/topstories/home/feeds/ap/2007/10/18/ap4234761.html</a></p>
 
WASHINGTON (MarketWatch) -- The level of outstanding asset-backed commercial paper fell by $11 billion, or 1.2%, to $888.3 billion in the week ending Wednesday, the Federal Reserve reported Thursday. Asset-backed paper has fallen for 10 straight weeks, dropping by $295 billion, or 25%. The decline in the market has squeezed mortgage lenders of their financing. On Monday, major banks announced a special fund to help themselves refinance the securities that have been locked out of the paper market. In the most recent week, the overall commercial paper market saw outstandings rise by $1.3 billion, or 0.1%, to $1.87 trillion.
 
Awgee--aah.



The lenders are not loaning money because they have no money to loan.

Ok, I should have realized that.



So then, all this stuff about improving the credit analysis tho true, is

irrelevant. If you have no money to loan, you have no money to loan to

very well qualified borrowers, so you only loan to the superstars, and you say you are just improving loan quality.



So I guess what is going on is that nobody trusts the big banks to correct their bad behavior, probably rightfully, tho it's hard to say they'd go right back to doing the same thing again, that what we are left with its the FHA, and Fannie and Freddie to inject some liquidity.



So no liquidity for months, or maybe years.



Anybody have any thoughts about the bankruptcy judges' possibly cramdown powers in the future?
 
<p>liz, as I understand it, that would require a change to the recently passed bankruptcy laws. Unless they get something zipped through both houses and on the President's desk in the next couple months, it will be too late to help those on the brink. I put the odds of Pelosi/Dodd/Bush agreeing on something at 10,000-to-1 in the current political climate.</p>
 
<strong>Living paycheck to paycheck gets harder</strong>





<a href="http://news.yahoo.com/s/ap/20071019/ap_on_bi_ge/stretching_paychecks_6">http://news.yahoo.com/s/ap/20071019/ap_on_bi_ge/stretching_paychecks_6</a>
 
<i>"Anybody have any thoughts about the bankruptcy judges' possibly cramdown powers in the future?"</i><p>


My only thought is that if the judges give to one party, they have to <b>take</b> from another.
 
<p>This article is unbelieveably ridiculous. The "expert" claims that $90/barrel oil is not bad in comparison to the oil crisis in 1980. That is like saying that our economy is going great because it is good compared to the Great Depression. Simply incredible.</p>

<p><a href="http://www.cnbc.com/id/21369448">www.cnbc.com/id/21369448</a></p>
 
True, of course awgee.

But, it could be that the cramdown is merely the acknowledgment of

what already happened, so what was taken away, was taken away by the market, and merely acknowledged by the bnkrcy judges, Since the house will not be left vacant losses could be less.



This like everything else could be highjacked by the unworthy. But the benefits could be greater than the costs. If it's not done in the next 2 or 3 months, it may as well not be done at all.
 
<p>Older, but interesting graphic I hadn't seen before from Nov 4, 2006 NYT article (<a href="http://www.nytimes.com/2006/11/04/business/04money.html?_r=1&oref=slogin">http://www.nytimes.com/2006/11/04/business/04money.html?_r=1&oref=slogin</a>)</p>

<p><img alt="Total Mortgage Equity Withdrawals" src="http://graphics8.nytimes.com/images/2006/11/04/business/1104-web-MONEY.gif" /></p>
 
<p>Margin Debt -- and Risk -- Is Growing </p>

<p><a href="http://online.barrons.com/article/SB119284249217965682.html?mod=9_0031_b_this_weeks_magazine_main">http://online.barrons.com/article/SB119284249217965682.html?mod=9_0031_b_this_weeks_magazine_main</a></p>

<p>EVEN AFTER A RECENT DROP, margin debt remains within spitting distance of the all-time high it hit in July, and 43% higher than it was a year ago. It's become a source of concern to some investors who worry that it makes the stock market more vulnerable to a nasty tumble, particularly if equities' resurgence continues.</p>



<p>"High margin debts show the effect of over-leveraging and mispricing of risk in our financial system," says Scott Schermerhorn, chief investment officer for Choate Advisors, which runs about $2.7 billion. "It indicates that, despite the August runoff, there's still more problems out there. This ...</p>
 
<p>Analysis: Finance leaders grapple with oil prices, falling dollar, credit crisis


</p>

<p><a href="http://www.signonsandiego.com/news/business/20071020-0041-financemeetings-analysis.html">http://www.signonsandiego.com/news/business/20071020-0041-financemeetings-analysis.html</a></p>

<p>The meeting of finance leaders from the Group of Seven industrial countries coincided with the anniversary of “Black Monday,” Oct. 19, 1987, when the Dow Jones industrial average plunged by 22.6 percent, its biggest one-day percentage loss ever. </p>

<p>While Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and their G-7 counterparts did not dwell on those long-ago events during their discussions Friday, the anniversary served as an eerie reminder that the global economy does not always perform as its handlers wish that it would. </p>
 
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