Tumbleric

Dec 03 2009 ∞
“ So far in his tenure, Chairman Bernanke has already told us that housing prices won’t go down, the subprime market will be “contained”, unemployment won’t get to 10% and that instead of regulation, those responsible Wall Streeters who used credit derivative swaps could just be trusted to use them “properly”. Of course, he thinks this performance should be rewarded with more power and utter secrecy.
— Dylan Ratigan: Americans Don’t Have Jobs, Will Ben Keep His?
Nov 19 2009 ∞
“ Advocates of the mortgage-interest deduction, for instance, claim that it increases homeownership rates. But it doesn’t: in countries where mortgage deductions have been eliminated, homeownership rates haven’t dropped. Instead, the deduction simply inflates house prices.
—

How the tax code encourages debt : The New Yorker

Correct. If you use the tax code to reduce the effective price of an asset, the price of that asset simply rises to offset the benefit. The only real beneficiaries are sellers.

Nov 13 2009 ∞
“ Let’s start with the credit card rate freeze. The rising rates charged by issuing banks that inspired Mr. Dodd’s legislation are themselves the unintended consequence of an earlier attempt to assist the consumer. Back in May, Congress passed a law requiring banks to give customers a 45-day notification before raising rates. To give banks time to adjust to the new rules, Congress decided not to put that provision into effect until February. So what happened next? Banks rushed to raise rates before the law takes effect. Many customers who may not have had their rates raised until 2010 — or perhaps not at all, if the economy continues to improve — found themselves paying higher rates even though they had not missed any payments. How could Mr. Dodd and his fellow lawmakers not realize that banks would pre-emptively raise rates?
—

Op-Ed Contributor - Where Credit Isn’t Due - NYTimes.com

I don’t know how many times I can say this before it gets annoying - by and large the people in our legislature simply aren’t smart enough. Chris Dodd? Which if you would actually hire Chris Dodd to do something important for your company or organization? I wouldn’t.

Nov 08 2009 ∞
“ Congress delivered an early Christmas present to the real-estate industry yesterday. Local real estate agents said the congressional action could lead to a busier-than-normal winter for home sales in Massachusetts. ‘I know it sounds self-serving, but I truly see this as a great stimulus (for the economy),’ said Gary Rogers, president of the Massachusetts Association of Realtors.
—

The Housing Bubble Blog

Houseowner A sells their house to Houseowner B (who gets money from taxpayers to do it). Houseowner A then goes and buys a house from Houseowner C (and gets money from taxpayers to do it). Can someone please explain to me these transfers of housing from one person to another stimulates the economy?

Nov 05 2009 ∞
“ Last fall, as the financial system was teetering and the biggest banks were tightening credit, Karen DeForte couldn’t find a lender to refinance the two mortgages on her New York home, until she received a phone call from Lend America. Most banks rejected Ms. DeForte because her debt level was too high and her credit score too low. But Lend America put Ms. DeForte into a $402,000 loan backed by the Federal Housing Administration, a New Deal-era agency that Washington and Wall Street were relying upon to pick up the slack in the mortgage market as private lenders pulled back. Ms. DeForte fell behind on payments six months later and is seeking a loan modification. Taking the loan was “a stupid mistake,” the 46-year-old office manager said.
—

FHA Digging Out After Loans Sour - WSJ.com

So, an office manager (let’s say she makes $65k) borrows $402,000 (~6.5x her income). The public subsidizes this loan via the FHA. But of course she can’t make the payments, because the loan is for too high a multiple of her income. So she seeks a mortgage modification, also subsidized by taxpayers, which presumably she’ll get. And that will be fine for a few months until (for any number of reasons) she re-defaults. Then what? How will the taxpayers continue to pay for this woman to be a home “owner” (quotation marks because her loan probably exceeds the value of her house)? A second modification? Principal reduction? More tax credits?

It continues to be mindblowing that we as a taxpayer base will spend tens of thousands of dollars to keep this individual woman in her mortgage. Not her house - that’s secondary. In her mortgage. And because that mortgage is likely larger than the value of the house, all of this rolls up to taxpayers basically paying up so this woman can remain a debt slave.

And you have to ask … why the hell are we doing this? And the answer is simple - it’s good for the banks.

Nov 04 2009 ∞
“ The Senate and House are poised to agree on a compromise measure to extend unemployment benefits that also would expand a popular $8,000 tax credit for homebuyers, despite a recent government report on extensive mistakes and suspected fraud in the program.
—

Congress Poised to Keep Homebuyers’ Tax Credit - NYTimes.com

What a huge shock…

Congress is crap at its job.

Nov 02 2009 ∞

Breaking news hits social networks in 3 mins; mainstream news sites in 20 mins.

mikehudack:

soupsoup:

(via @RachelSterne)

I’d like to better understand what percentage of that “breaking news” that hits social nets is incorrect. Is the 17 minute delta the price we pay for accuracy and actionability?

Also - for what percentage of “breaking news” does 17 minutes genuinely matter? Unless it’s “A tidal wave is heading toward Manhattan” I’m generally fine with waiting 17 extra minutes to get something that’s been fact-checked.

Nov 01 2009 ∞
“ The trouble is that those GDP and productivity growth figures could be significantly overestimated—perhaps by one percentage point or even more. That’s because the official statistics are not designed to pick up cutbacks in “intangible investments” such as business spending on research and development, product design, and worker training. There’s ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation. Without investment in intangibles, the U.S. can’t compete in a knowledge-based global economy. Yet you won’t see that plunge reflected in the GDP and productivity statistics, which are still too focused on more traditional sectors, such as motor vehicles and construction.
—

The GDP Mirage - BusinessWeek

My ongoing fear is that we are recklessly behaving in a way that prioritizes short-term results (“There will be no more Lehman’s) at the expense of much longer-term consequences. Whether those are consequences to our currency, to innovation spending as referenced above, or to the overall financial health of consumers (“BUY A HOUSE (you can’t really afford) NOW! HERE’S SOME MONEY TO GO DO IT!”), we are pushing ahead with near-term measures to convince ourselves that the problem is past. I don’t think it is, and solutions like the one above are worse than the problems they purport to solve.

Oct 29 2009 ∞
“ Whenever the tax credit finally expires, Las Vegas and every other city will have to confront the inevitable question after all such stimulus packages: what will motivate the buyers of tomorrow? “In my office, people were buying homes left and right because of that tax credit,” said Kitty Berberick, who works for an insurance company in Las Vegas. “That credit was a godsend.
—

Fears of a New Chill, Just as Home Sales Had Begun to Thaw - NYTimes.com

No, Kitty Berberick, a “godsend” would be housing priced affordably, so that people could buy them without having to be given taxpayer money.

Oct 28 2009 ∞
“ What happens when you artificially prop up housing prices? Imagine the credit were expanded to all home buyers and made permanent. This would simply boost housing prices at the low end of the market by close to $8,000, since all buyers would be willing to pay $8,000 more. (Prices would rise by a little less than $8,000 because at higher prices, more people would be willing to sell.) Whom does this benefit? Not first-time home buyers. It benefits people who already own houses (and their real estate agents) because it’s a one-time boost in housing values. This would be just the latest chapter in a long history of government policies to boost housing prices — the mortgage interest tax deduction, the capital gains exclusion on houses, the extension of the mortgage interest tax deduction to second houses, etc. Each of these policies pushes up prices just once; if you want to keep pushing up housing prices, you have to keep adding sweeteners. A temporary tax credit has a similar effect, but for a shorter period of time. It boosts the price of a transaction that would have happened anyway. It may create additional transactions, but is that a good thing? If someone could not have afforded a house without the tax credit, then what is he or she going to do when the tax credit goes away and the price of the house falls? In effect, the tax credit is a way of making houses temporarily affordable that would not otherwise be affordable, and we know where that leads.
— Simon Johnson and James Kwak - The home-buyer tax credit: Throwing good money after bad - washingtonpost.com
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