Dean Baker, famous for having called the housing bubble in 2002, reports this morning that the Fed is going to lend directly to non-financial corporations that can't get loans though the usual channels. I guess it's because I'm a bit of a control freak that I didn't think giving money to banks (I mean, buying bad securities for high prices isn't exactly "purchasing") would solve our credit problems. What, I thought, if the banks just pocketed the money? The Paulson Plan (PP) doesn't require much of the banks or their officers, after all.
So I'm feeling a bit cocky this morning, and will therefore make some more suggestions, in no particular order or priority:
1. Can the $700 billion to the banks. It's throwing good money after bad. If the banks are insolvent, and it appears that they are, nationalize them. We can keep them, sell them, whatever, later on. Just get control and find out what's going on.
2. Make grants to state and local governments where necessary. State and local governments are losing revenue even as we speak, since they're dependent on tax revenue that is declining with dispatch. This won't increase spending; it will just keep spending even.
3. Freeze foreclosures. We have no handle on who owns what, who owes what, who can be saved, who can't. Just put everything on hold through the end of the year. That way, the government has time to figure this out and work out an orderly sell-off. (Yes, we're going to end of selling off a bunch of property for much less than the face value of the mortgages. Get over it.) And no one gets evicted before the holidays.
4. We're going to have a lot of unemployment. In addition to the collapse of construction and housing-related industries, retail is going to be in bad trouble and retail employs a whole lot of low-paid (and therefore precarious) workers. So dump a lot of money into unemployment insurance, so that these workers can survive. And because unemployment insurance doesn't cover a lot of workers, create a new fund to cover those workers.
5. Create new jobs--useful jobs. In addition to the army of financial regulators we'll need, every state has public projects that need to be done. Set priorities to employ the unemployed.
6. Provide funds to buy up foreclosed houses for use as permanent affordable housing. But insure that local governments don't just bail out the real estate industry by purchasing the abandonment-grade stuff that should be torn down.
J and I will be working in the garden today, so I'll come up with more ideas in future posts.
Tuesday, October 7, 2008
Monday, October 6, 2008
A Lizard in the Yard
We've had all sorts of critters visit the yard--frogs, possums, racoons, cats--not to mention every aphid and whitefly for 30 miles. And we have lizards living in the front yard. This is the first, though, in the back. We think he was waiting for evening, when bugs fly toward the living room window and he could get an easy meal.
The day after this picture was taken, Dash was caught chasing the lizard across the yard. I grabbed Dash and allowed the little guy to escape. Emma, who is not known as kitty Mensa material, spent a couple of hours waiting near where she and Dash had first sighted the lizard, I guess hoping for its return.
Thursday, October 2, 2008
Is It Extortion?
I try not to think of the current credit crunch as a conspiracy to extract free money from the taxpayers. But the problems the State of California is having arranging bridge loans makes me wonder. Governments are generally very good credit risks; after all, they have an ability to raise money from a nearly bottomless pit. (Yeah, us.) So I wonder if the threat not to lend to the state government doesn't indicate that the banks are overplaying their hand here.
There's a lot in the credit crunch that's bad. But there's some common sense in it too. As real estate prices have fallen, people find it more difficult to borrow against their houses. Well, they should find it more difficult. They don't have as much equity in their houses and the banks look at that in deciding how much to lend. And if the banks believe that prices may fall some more, they're going to be a lot more conservative in their lending decisions.
And cars. People are having trouble getting car loans, but if you read down into the articles, it's because they can't come up with the down payment from their home equity. See above. When they have to finance a car without that down payment source, they have to buy smaller, cheaper and, hopefully more fuel-efficient, cars.
Particularly in the big bubble areas, we can expect that all sorts of retail will go out of business. These businesses were subsidized with home equity extractions. Without that, there's a lot less money around and at least some, if not a lot, of retail establishments won't make it. So the housing bubble won't just bring us empty houses, but empty storefronts as well.
There's a lot in the credit crunch that's bad. But there's some common sense in it too. As real estate prices have fallen, people find it more difficult to borrow against their houses. Well, they should find it more difficult. They don't have as much equity in their houses and the banks look at that in deciding how much to lend. And if the banks believe that prices may fall some more, they're going to be a lot more conservative in their lending decisions.
And cars. People are having trouble getting car loans, but if you read down into the articles, it's because they can't come up with the down payment from their home equity. See above. When they have to finance a car without that down payment source, they have to buy smaller, cheaper and, hopefully more fuel-efficient, cars.
Particularly in the big bubble areas, we can expect that all sorts of retail will go out of business. These businesses were subsidized with home equity extractions. Without that, there's a lot less money around and at least some, if not a lot, of retail establishments won't make it. So the housing bubble won't just bring us empty houses, but empty storefronts as well.
Wednesday, October 1, 2008
What Silliness
One of the dumbest arguments in defense of the bailout of the banks is that we all participated in the bubble. It's hard to argue, though, that tenants participated in it. And arguing that someone who got a job as a clerk at Home Depot benefitted is pretty iffy. (After all, if the money had been put into something other than trading toxic securities, the worker might have gotten a better job doing something else.) We could, I guess, argue that real estate salespersons, construction workers and others received some benefit, but getting a job and then losing it happens to lots of people and we don't generally hold them accountable for the rise and fall of their industries. Some homeowners might have benefited, particularly if they sold their houses, but I can't see a windfall profits tax. And homeowners who face foreclosure or ruinous mortgage payments--I just don't see a lot of good coming out of their participation in it.
All this seems to be designed to cover the fact that the people who have done so much to collapse our financial system are the bankers and traders who packaged and sold mortgage securities they knew or should have known were junk. And it's possible that we'll have to deal with the problems they have wrought. But it shouldn't be easy for them. If they're going to get welfare, they should have to jump through the hoops we make single mothers with children jump through for a pittance and food stamps.
I have a vision of bankers filling out long, involved forms--maybe equivalent to the 28 pages that parents had to fill out in California to get their children insured through Healthy Families. How long would the equivalent form be when the bankers are asking for billions? Bankers would then bring their forms and the supporting documentation to a grungy office, either too hot or too cold, where they would sit on an uncomfortable plastic chairs, chairs that are bolted to the floor, for the day. Their caseworkers would then reject the application and the bankers would have to redo the forms and obtain more documentation. Oh, and don't forget the armed security guards protecting the office.
We wouldn't want them to develop a sense of entitlement, after all.
All this seems to be designed to cover the fact that the people who have done so much to collapse our financial system are the bankers and traders who packaged and sold mortgage securities they knew or should have known were junk. And it's possible that we'll have to deal with the problems they have wrought. But it shouldn't be easy for them. If they're going to get welfare, they should have to jump through the hoops we make single mothers with children jump through for a pittance and food stamps.
I have a vision of bankers filling out long, involved forms--maybe equivalent to the 28 pages that parents had to fill out in California to get their children insured through Healthy Families. How long would the equivalent form be when the bankers are asking for billions? Bankers would then bring their forms and the supporting documentation to a grungy office, either too hot or too cold, where they would sit on an uncomfortable plastic chairs, chairs that are bolted to the floor, for the day. Their caseworkers would then reject the application and the bankers would have to redo the forms and obtain more documentation. Oh, and don't forget the armed security guards protecting the office.
We wouldn't want them to develop a sense of entitlement, after all.
Sunday, September 28, 2008
My Poor, Poor Lettuce
I planted lettuce, thinking that the really hot weather here was over for the year and that my red oak leaf would grow and flourish in the cooler weather. It promptly turned hot (98 degrees today) and I fear the lettuce will bolt.
Cats and Their Toys
Dash and Emma have a full basket full of cat-appropriate toys. They play with about four of them. Dash is an afficionado of feather or cord on a stick, while Emma prefers mouse on elastic. Why? We have no idea. It is not not the place of the human to question the wisdom of the cat; the human is there to put the toy of choice into play.
When Dash was a kitten, he would play fetch with the little mice (no, not live ones) that we bought at the pet store. He could play it for an hour at a time. A human threw the mouse, Dash recovered it and brought it back. Repeat. Repeat. Repeat.
Emma, who always preferred play to any other activity, was a tart in her toy affections. She'd play with any toy, so long as a human was playing with her. She liked kitty racquet ball for a long time. To play this game: select a small round object, throw it against the window, watch the cat run and catch the object. The cat will then drop the item, so that the human can put it in play again.
But Emma has lost interest in racquet ball, just as Dash will no longer fetch. Now Dash wants to play either feather or cord on a stick, while Emma makes clear that no game other than mouse on an elastic will please. So I sit in the chair, holding the elastic end and flinging it back and forth. Emma chases, catches, attacks the mouse. Repeat. Repeat. Repeat.
When Dash was a kitten, he would play fetch with the little mice (no, not live ones) that we bought at the pet store. He could play it for an hour at a time. A human threw the mouse, Dash recovered it and brought it back. Repeat. Repeat. Repeat.
Emma, who always preferred play to any other activity, was a tart in her toy affections. She'd play with any toy, so long as a human was playing with her. She liked kitty racquet ball for a long time. To play this game: select a small round object, throw it against the window, watch the cat run and catch the object. The cat will then drop the item, so that the human can put it in play again.
But Emma has lost interest in racquet ball, just as Dash will no longer fetch. Now Dash wants to play either feather or cord on a stick, while Emma makes clear that no game other than mouse on an elastic will please. So I sit in the chair, holding the elastic end and flinging it back and forth. Emma chases, catches, attacks the mouse. Repeat. Repeat. Repeat.
Friday, September 26, 2008
Maybe We SHOULD Recall Him
The Guvernator struck several blows in defense of his friends, the mortgage brokers, lender servicers and landlords who brought you the mortgage crisis. In a stirring defense of the right of mortgage brokers to behave like the used car salesmen to whom they are kin, the vetoed AB 1830, which would require that mortgage brokers regulated by the state meet certain quite minimal requirements. Schwarzenegger asserted (I will not call his statements "arguments") that requiring those working for entities regulated by the state to meet these requirements would put these organizations at a disadvantage with respect to federally-regulated mortgage dealers. Well, given that 60% of the subprime mortgages issued in California were issued by state-regulated entities, it might be a good start. But Schwarzenegger got even sillier when he stated that allowing the plaintiff who sued a miscreant broker to recover attorney's fees if she prevailed in a lawsuit was an onerous burden. Uh, Gov, lots of legislation allows the prevailing party to recover attorney's fees--it's part of winning. And it's an additional deterrent to making a loan that is in the interest of the broker's commission, but is potentially dangerous to the borrower, a loan which is then sold into the secondary market, packaged in a mortgage-backed security, sold a bunch of places...and then...and then...costs the taxpayers $700 billion.
Alas, the Governor didn't stop there. Perhaps he didn't know how often tenants who demand their rights face harassment from lenders and their realtor representatives, and how important it is to have specific laws detailing exactly what these people cannot do in dealing with tenants in foreclosed properties. But it's much more likely that he saw how much the realtors, mortgage brokers and lenders had contributed to his campaigns, and decided that tenants just weren't all that important.
So he vetoed both AB 1333 and AB 2586, which would have provided clear recourse for tenants facing the harassment of utility cutoff. His assertions in defense of the vetoes ranged from ones that were irrelevant--tenants already have the right to utilities--to the offensive--if someone's gotta lose money, it should be tenants, because it would be too much of an onerous burden to lenders or landlords. You can read his veto messages here and here.
With respect to security deposits, the guy doesn't know the law. Some years ago the rules on security deposits were revised to prevent just this kind of theft of security deposits. The State Legislature, not a known defender of tenants' rights, was convinced to make clear that the entity that owned the building when a tenant moved was required to return the tenant's security deposit. On any transfer of the building, the landlord was required to either transfer the deposit to the new landlord or return the deposit to the tenant. And if the deposit was not returned, the tenant could assume that the deposit had been transferred. And if the new owner hadn't received the deposit, that was not the tenant's problem. So if you read his veto message, you'll note that he doesn't understand the law as written. Yeesh!
(This actually had nothing to do with foreclosures, but the bad habit of landlords failing to return security deposits when buildings had been sold, sometimes several times, during a tenancy, where the landlord died and the probate court failed to transfer the deposit to the new owner etc. The Legislature determined that tenants shouldn't have to figure out where the money went. If you owned the building when the tenant moved, and the deposit hadn't been returned to the tenant, you paid the money.)
And as for tenant harassment, uh, Governor, I don't have a short section on my Tenants and Foreclosure blog for fun, explaining that if tenants are threatened or assaulted, they should call the police. It's because I've had people write to me who have suffered abuse at the hands of the lenders and their agents. Utility cutoffs are only the beginning of their bad behavior. So, should you be so inclined, feel free to call the Governor's office at 916-445-2841 and tell him what you think.
Alas, the Governor didn't stop there. Perhaps he didn't know how often tenants who demand their rights face harassment from lenders and their realtor representatives, and how important it is to have specific laws detailing exactly what these people cannot do in dealing with tenants in foreclosed properties. But it's much more likely that he saw how much the realtors, mortgage brokers and lenders had contributed to his campaigns, and decided that tenants just weren't all that important.
So he vetoed both AB 1333 and AB 2586, which would have provided clear recourse for tenants facing the harassment of utility cutoff. His assertions in defense of the vetoes ranged from ones that were irrelevant--tenants already have the right to utilities--to the offensive--if someone's gotta lose money, it should be tenants, because it would be too much of an onerous burden to lenders or landlords. You can read his veto messages here and here.
With respect to security deposits, the guy doesn't know the law. Some years ago the rules on security deposits were revised to prevent just this kind of theft of security deposits. The State Legislature, not a known defender of tenants' rights, was convinced to make clear that the entity that owned the building when a tenant moved was required to return the tenant's security deposit. On any transfer of the building, the landlord was required to either transfer the deposit to the new landlord or return the deposit to the tenant. And if the deposit was not returned, the tenant could assume that the deposit had been transferred. And if the new owner hadn't received the deposit, that was not the tenant's problem. So if you read his veto message, you'll note that he doesn't understand the law as written. Yeesh!
(This actually had nothing to do with foreclosures, but the bad habit of landlords failing to return security deposits when buildings had been sold, sometimes several times, during a tenancy, where the landlord died and the probate court failed to transfer the deposit to the new owner etc. The Legislature determined that tenants shouldn't have to figure out where the money went. If you owned the building when the tenant moved, and the deposit hadn't been returned to the tenant, you paid the money.)
And as for tenant harassment, uh, Governor, I don't have a short section on my Tenants and Foreclosure blog for fun, explaining that if tenants are threatened or assaulted, they should call the police. It's because I've had people write to me who have suffered abuse at the hands of the lenders and their agents. Utility cutoffs are only the beginning of their bad behavior. So, should you be so inclined, feel free to call the Governor's office at 916-445-2841 and tell him what you think.
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