Here we go again (Low low down payment)

[FlyerInHi]

I don’t think that unfunded pension liabilities is a systemic problem that will cause banks to collapse and liquidity to dry up in the economy.

Even if municipalities promised too much, I think that voters are pretty much maxed out in terms of tax increases. They won’t approve more.

Municipalities will always pay their bonds and employees. They may cut services to the bones and citizens will suffer.

But if they reach a point they can’t pay anymore, there’s a process called bankruptcy. Detroit did it.

[FlyerInHi]

[quote=flu]
And no, we didn’t see that average 30-35%+ plunge in home prices in Carmel Valley or Del Mar that people were expecting to see..And no, we didn’t see all that pent up shadow inventory in this area that supposedly existed too.[/quote]

Yes, Carmel Valley held up pretty well because liquidity was restored so that tech companies didn’t have a retreat. Tech plowed straight ahead out the Great Recession.

But it depends on the market. I saw a place in Vegas that sold at peak for $990k. Now asking $335k.

Like you wrote earlier, an investor may have to seek opportunities outside of the coastal markets. There are opportunities out there, but it’s work.

[Coronita]

[quote=FlyerInHi]
Municipalities will always pay their bonds and employees. They may cut services to the bones and citizens will suffer.

But if they reach a point they can’t pay anymore, there’s a process called bankruptcy. Detroit did it.[/quote]

And Detroit is proving that, yes they can rewrite contracts all the time if push comes to shove…

[CA renter]

“DETROIT – Workers and retirees approved pension cuts in Detroit’s bankruptcy by a landslide, the city reported Monday, a crucial step to emerging from the largest municipal insolvency in U.S. history.”

…“General retirees would get a 4.5 percent pension cut and lose annual inflation adjustments. They accepted the changes with 73 percent of ballots in favor. Retired police officers and firefighters would lose only a portion of their annual cost-of-living raise. More than 80 percent in that class voted “yes.”‘

http://www.foxnews.com/politics/2014/07/22/detroit-city-workers-retirees-vote-in-favor-pension-cuts-in-bankruptcy-plan/

[FlyerInHi]

IIRC, private foundations also offered Detroit about more than $800 million, and creditors took haircuts to 14cents on the dollar.

[CA renter]

Yes, all/most stakeholder groups will get hit in a BK case. My point was that the unions agreed to the cuts. Union workers understand that they have to give sometimes, and they’ve been doing so throughout the recession; their objection is to the vilification of labor and the ridiculous propaganda going around suggesting that labor should be the only, or primary, stakeholder group to take a hit.

[FlyerInHi]

I don’t know why citizens are so averse to their cities going BK. Bankruptcy is actually a good thing because it forces unions and creditors to negotiate, or have a solution forced on them.

When politicians talk about “finding ways to avoid bankruptcy”, it’s a euphemism for more taxes and less services for ordinary citizens.

[CA renter]

[quote=FlyerInHi]I don’t know why citizens are so averse to their cities going BK. Bankruptcy is actually a good thing because it forces unions and creditors to negotiate, or have a solution forced on them.

When politicians talk about “finding ways to avoid bankruptcy”, it’s a euphemism for more taxes and less services for ordinary citizens.[/quote]

The same could be said for the general population — that people should not try to avoid filing for BK. Having been on the creditor side of a BK case (fought hard and won a settlement, but the very long process was hell), I can say for a fact that the BK scam works wonders for the deadbeats who file. Do you think it’s a good idea to promote BK for individuals? Any possible negative outcomes that you can see?

[FlyerInHi]

Yes, people should be encouraged to renegotiate their debts and preserve their standards of living.

When it comes to cities in financial difficulty, the right thing to do is not to keep on paying creditors. You have to preserve good services to protect the future of the city.

[CA renter]

[quote=FlyerInHi]Yes, people should be encouraged to renegotiate their debts and preserve their standards of living.

When it comes to cities in financial difficulty, the right thing to do is not to keep on paying creditors. You have to preserve good services to protect the future of the city.[/quote]

That depends very much on which side you’re on (creditor or debtor). If contracts no longer mean anything, what does that do to an economy and society?

[scaredyclassic]

[quote=CA renter][quote=FlyerInHi]Yes, people should be encouraged to renegotiate their debts and preserve their standards of living.

When it comes to cities in financial difficulty, the right thing to do is not to keep on paying creditors. You have to preserve good services to protect the future of the city.[/quote]

That depends very much on which side you’re on (creditor or debtor). If contracts no longer mean anything, what does that do to an economy and society?[/quote]

it doesn’t mean contracts are meaninhless. Bankruptcy is foreseeable and can be negotiated with that possibility in mind.

[CA renter]

We disagree very strongly about that, scaredy. What Brian’s proposing would absolutely mean that contracts are meaningless. Most contracts relate to transactions of some sort (feel free to correct me here, as you’re the attorney), and saying that one party doesn’t have the obligation to fulfill their end of the deal, or that it should be easy for them to get out of it, makes the contract meaningless.

Also, bankruptcy is NOT foreseeable in most cases. If it were, most lenders wouldn’t make these loans.

If people thought that the credit market was “tight” during the financial crisis, I can assure you that it would be even worse if we were to follow Brian’s advice.

[livinincali]

[quote=CA renter]
Also, bankruptcy is NOT foreseeable in most cases. If it were, most lenders wouldn’t make these loans.

If people thought that the credit market was “tight” during the financial crisis, I can assure you that it would be even worse if we were to follow Brian’s advice.[/quote]

I’m pretty sure most of the underwriters during the housing crisis could see bankruptcy and default when they were loaning people 700K when they made 50K annual income. It’s just that they could risk shift it to somebody else with Credit Default Swaps. Credit should be tight, there’s no good reason for loose credit standards except that it helps inflate the costs of things. How much would college cost if you could declare bankruptcy and get rid of student loans? It wouldn’t be nearly as expensive as it is because nobody would be loaning 100K to a liberal arts major anymore.

[FlyerInHi]

CAr, you often bitterly complain about double standards between how businesses operate and how individuals are expected to behave.

Yes, for businesses and their lawyers especially bankruptcy is foreseeable. That’s why business people form corporations so that their personal wealth is insulated.

Individuals, and municipalities should seek bankruptcy whenever best to protect standards of living. Why live on macaroni and cheese just to pay the creditors? That’s pretty stupid, IMO.

For municipalities, why cut services to the core where citizens have to pay taxes and have little services while creditors are paid in full?

[CA renter]

[quote=livinincali][quote=CA renter]
Also, bankruptcy is NOT foreseeable in most cases. If it were, most lenders wouldn’t make these loans.

If people thought that the credit market was “tight” during the financial crisis, I can assure you that it would be even worse if we were to follow Brian’s advice.[/quote]

I’m pretty sure most of the underwriters during the housing crisis could see bankruptcy and default when they were loaning people 700K when they made 50K annual income. It’s just that they could risk shift it to somebody else with Credit Default Swaps. Credit should be tight, there’s no good reason for loose credit standards except that it helps inflate the costs of things. How much would college cost if you could declare bankruptcy and get rid of student loans? It wouldn’t be nearly as expensive as it is because nobody would be loaning 100K to a liberal arts major anymore.[/quote]

We’re very much in agreement about credit standards — credit should never be loose, and borrowers/lenders should never be encouraged to behave in irresponsible ways.

While I agree that the underwriters *should have known* about the default risks with those mortgages, they were encouraged by people up the chain of command to keep their mouths shut and process the loans. It’s this type of corruption that needs to be stopped. They did it because they knew they could rely on being bailed out (by the Fed, taxpayers, etc.); they knew it.

[Author]

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