San Diego Housing Bubble News and Analysis

Then they need to reevaluate what PhDs/MBAs from Ivy League business schools are worth. Since most of these fools in power who have them didn't have the common sense of the armchair economist Bloggers who foresaw this. All that we needed was a fraction of the data the government has access to and a little insight and common sense to put it all together.

Bernanke, Paulson, Cox, Bair, Pres. Clinton and Greenspan should all have their degrees revoked for this. I'd add Bush to the list but I don't know if he actually has a degree...

LOL, now that was funny! Particularly since he's got a bach. from Yale and an MBA from Harvard. Wonder what the big wigs at Yale & Harvard think about their alumni now. Kinda embarrassing I would think.

You really need to check the facts before bashing Bush for the collapse of the credit markets.

Here is a little excerpt of what happened when republicans tried to put more regulations on Freddie and Fannie..

video

Who the heck cares about regulations on Freddie and Fannie? They were so regulated that, by 2006, their combined market share of the residential mortgage market was down to 25%.

I'd like to hear about republican attempts to regulate true masters of subprime, stated income, and negative amortization: Countrywide, and Washington Mutual, and the likes.

The point is that most of the Piggs saw the red flags and the people who should've didn't.

Here is a little excerpt of what happened when republicans tried to put more regulations on Freddie and Fannie..

Posturing. Just like the demacorps that pretend they are anti-war. Hint: Looks good for the constituentcy. Nobody questions the banksters, they reign supreme.

If economic idiots like myself could see this coming back in 05 so could they. Hell, Bernakes expertise is the depression, coincidence?

You have to ask yourself, why, if you believe the knew it was coming?

Has anyone compared the total $$$ amount for subprime mortgages serviced by Fannie/Freddie vs. the $$$ amount for mortgage securities/CDS's?

$47.2 billion - Fannie Mae
$120.8 billion - Freddie Mac

CDS's in the financial market - current estimate $60 trillion in credit default swaps.

I'm not particularly enamored with Republicans or Democrats, and I really dislike spin since most Americans don't have the critical/independent thinking skills to decipher what is really being said. Do some research and don't blindly believe what either party is telling you. Both parties are guilty in this financial crisis. Anyone who believes the crap being fed to them deserves it.

I think that we all had front-row seats in the housing bubble. If neither you nor people you know are in the market for a house, and/or you don't live in a housing-bubble area, it's hard to see the bubble. Most of those people you're blaming are long-time homeowners and they are quite rich. Even here in San Diego, high end did not get all that bubbly.

Oh, they knew. It just wasn't in their best interest to be truthful about it. They aren't that stupid.

Why do you think government tightened up the bankruptcy laws in 2005? Because they knew this was coming and wanted to make us debt slaves.

In our case; it *was* in our best interest to be truthful about it.

Edit: Think of it this way. If you speak the party line; you get very rich. If you tell the truth, you get fired. What would you do?

Let me guess, esmith, you own a house, maybe high end, maybe in SD.

I had Rich and Ben Jones on my radio program in 2005. They were prescient in their description of what HAD to happen. Ben commented that he'd seen this movie before and it didn't end well. Rich demonstrated his masterful knowledge of the statistics in San Diego and conclusion that it "could not" play out without pain and destruction. I commented that, in the rear view mirror, we would all be looked at as prophets. I'm disgusted at the Govt. "experts" who could not see what a bunch of yahoos like us saw.

The Real Deal

So who is to blame? There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:

* The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.

* Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.

* Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.

* Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.

* The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.

* Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.

* Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.

* Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.

* The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.

* An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.

* Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation. Claiming that a single piece of legislation was responsible for (or could have averted) the crisis is just political grandstanding. We have no advice to offer on how best to solve the financial crisis. But these sorts of partisan caricatures can only make the task more difficult.

–by Joe Miller and Brooks Jackson

/waves

I also saw this on C-Span and was amazed at the sheer gall of people like Greenspan, and the former treasury secretary (?) who seemed adamant that they didn't see this coming, or as Greenspan put it, couldn't have "predicted" it. Cox was a little more forthright, and pointed the finger at regulations, or lack thereof being the primary cause. So from that, we are to read that they saw it coming, but nobody had the authority to stop it ...and of course we all know how hard they tried :) It just seems too many were making too much, and cared too little for the consequences.

I was just saying this to some fellows around the office yesterday in regards to the above.

"I wish our country could return to a time when I felt that our leaders, financial or govermental, were smarter than us (meaning the general population)."

It probably never existed but what horse shit these guys are exhuding. Dr. Doom (Schiff) was one of the few mainstream'ers that was calling it and many arm chair analyst were also.

I guess we can trust no one but ourselves anymore.

Take Care,

Oink,

CE

Alan Greenspan needs to be arrested, for fraud and treason. The fact that this man, who has deliberately gutted the US economy over the past 20 years, is hardly under any sort of serious scrutiny, and is not only allowed to remain out of prison, but gets the chance to go public with ever more lies about his actions, points to troublesome inadequacies in the political system that some still refer to as a democracy. The same goes for Hank Paulson, who can't just walk free, but was even appointed dictator over Washington.

He means virtually no one that they weren't ignoring.

Thank you Joe Miller and Brooks Jackson.. So we know you're good at pointing out the problem. What is the solution. I hate when I go into meetings and all people do is point out problems. It's obvious that there is a problem and it easy to agree with everything you said, but the's hear the solution...

Greenspan stating that that he (& his anti-American friend Rand) believed that banks would always act in the interest of shareholders is the most insane thing he has said. Hello, remember the S&L hell that he presided over in late 80's and early 90's. Did the S&L's care about shareholders when they were financing $500M skyscrapers worth $100M? ZERO risk with FDIC ready to bail out depositors. Why did none of our brilliant Congressman ask Greenspan about the S&L history?

The system is rigged, folks. If you don't know that by now, then you have some homework to do. Economists and politicians that are TRAINED EXPERTS in their fields had no idea that this was coming? Common! We need more government regulation of the markets? Are you serious?

The worst outcome of this quagmire is that free-market capitalism, I mean TRUE, free-market capitalism, ends up being the scapegoat. If you think that what we have seen over the past half century has been free-market capitalism, then there's some work to be done here.

There will NEVER be free-market capitalism when BAILOUTS are a common end result, nay, the ultimate goal, of our flawed system!

In math, this would be like saying that 3-4=-1, unless 4 is too big to fail. If 4 is too big to fail, the end result will be +1...and the taxpayers will have to make up the difference for the other 2.

Take away the bailouts and the safety nets and you will start to see the markets act like they should...like there are actual consequences for people's actions and that they will be held accountable.

I think most people in the business knew that the outcome was going to be pretty ugly but with everyone making big money hand over fist who was going to be the one to stand up and try to stop the money train? Really it was the RE industry that was carrying the US economy during those years so you know the government wasn't going to intervene. I imagine the Bush administration was hoping to be out of office by the time the shit hit the fan.

When you here talk like "no one saw this coming" its mainly geared towards regular working people that really have no clue what is going on in the financial world, a way to try and save face after screwing us over.

I think DaveLJ had a great point about this. It is easy to see it all in hindsight, and it is easy to see from the outside. But, in the heat of the momment, in 2001-2005 (when this shit really went bad) it wasnt easy to see. Atleast from the inside that is.
Weither it is stupid or not we tend to measure ourselves against those we compete against. It was a very long series of very small steps in the wrong direction. Banks that didnt play the game didnt make as much money. If they didnt make as much money as the other guys then the stocks fell, boards got unhappy, CEO's get replaced, tallent gets "adjusted" until they started to play the game. Then, as everyone is playing the game it isnt as profitable as it once was, so the most agressive "producers" tweek it alittle again until the profits return. Then everyone else has to play catchup, and away we go.
That is what they mean that they didnt see it. They were not going from 0-60 in 4.5 seconds. They Were going from 0-60 in 4.5 years, and using about 50 gears to do it. It doesnt matter though, because it only matters if we hit 60, and we did and the car fell apart. It all went real slow, gradual, and if they had stopped in 2003 or so, it wouldnt be this bad. But nobody stopped because nobody was incharge of the whistle. So that is why everyone is to blame.

But nobody stopped because nobody was incharge of the whistle.

I think this is the key. Here is a directive of the Federal Reserve.

Preventing asset bubbles

The board of directors of each Federal Reserve Bank District also have regulatory and supervisory responsibilities. For example, a member bank (private bank) is not permitted to give out too many loans to people who cannot pay them back. This is because too many defaults on loans will lead to a bank run. If the board of directors has judged that a member bank is performing or behaving poorly, it will report this to the Board of Governors. This policy is described in United States Code, Title 12, Chapter 3, subchapter 7, section 301:[23]

Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.

The punishment for making false statements or reports which overvalue an asset is stated in U.S. Code, Title 18, Part 1, Chapter 47, Section 1014:[24]
Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way...shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

These aspects of the Federal Reserve System are the parts intended to prevent or minimize speculative asset bubbles which ultimately lead to severe market corrections.

Methinks the private bank that we give the privilege of coining our currency and "holding the whistle" should have that privilege taken away. They are the monetary policy makers. And Greenscam did make a false statement in 2004-whether knowingly or not needs to be addressed.