[ucodegen]

One thing I found interesting when watching Congress grill Gietner and Paulson, was how little Congress really understood what caused this recession and how little Congress understood businesses, business law and corporate structures.

It was not hedge fund activity and ‘proprietary trading’ that caused this problem. It was poor mortgage lending based upon flawed foreclosure recovery models and flawed CDS premiums. Yet, instead of looking at making CDS(s) a true insurance product and requiring extra capitalization to cover potential losses when being the insuring entity, they look at putting restriction on banks that may fit the ‘too-big-to-fail’. This also ignores the activities within the Fed that may have put at least one healthy bank at risk by forcing it to buy out another. Congress also looks at ‘taxing’ the banks that may have made it past the initial problems. This penalizes banking entities that may have made rational decisions allowing them to survive. Note to Congress: We may still have problems with the hidden inventory that was caused by HAMP and all of the other restrictions placed on banks pursuing foreclosure.

Congress also didn’t seem to understand why the money to AIG was loaned to the parent vs just the insurance arm that handled CDS(s). The reason why you do this is so that AIG can’t shed their responsibility to the government money by shedding their subsidiary with the associated bonds. With the present structure, if AIG defaults on the bonds, the US government has the potential to own a good portion of AIG itself instead of just a problematic subsidiary. AIG has other parts of its business that are presently profitable.

[ucodegen]

One thing I found interesting when watching Congress grill Gietner and Paulson, was how little Congress really understood what caused this recession and how little Congress understood businesses, business law and corporate structures.

It was not hedge fund activity and ‘proprietary trading’ that caused this problem. It was poor mortgage lending based upon flawed foreclosure recovery models and flawed CDS premiums. Yet, instead of looking at making CDS(s) a true insurance product and requiring extra capitalization to cover potential losses when being the insuring entity, they look at putting restriction on banks that may fit the ‘too-big-to-fail’. This also ignores the activities within the Fed that may have put at least one healthy bank at risk by forcing it to buy out another. Congress also looks at ‘taxing’ the banks that may have made it past the initial problems. This penalizes banking entities that may have made rational decisions allowing them to survive. Note to Congress: We may still have problems with the hidden inventory that was caused by HAMP and all of the other restrictions placed on banks pursuing foreclosure.

Congress also didn’t seem to understand why the money to AIG was loaned to the parent vs just the insurance arm that handled CDS(s). The reason why you do this is so that AIG can’t shed their responsibility to the government money by shedding their subsidiary with the associated bonds. With the present structure, if AIG defaults on the bonds, the US government has the potential to own a good portion of AIG itself instead of just a problematic subsidiary. AIG has other parts of its business that are presently profitable.

[ucodegen]

One thing I found interesting when watching Congress grill Gietner and Paulson, was how little Congress really understood what caused this recession and how little Congress understood businesses, business law and corporate structures.

It was not hedge fund activity and ‘proprietary trading’ that caused this problem. It was poor mortgage lending based upon flawed foreclosure recovery models and flawed CDS premiums. Yet, instead of looking at making CDS(s) a true insurance product and requiring extra capitalization to cover potential losses when being the insuring entity, they look at putting restriction on banks that may fit the ‘too-big-to-fail’. This also ignores the activities within the Fed that may have put at least one healthy bank at risk by forcing it to buy out another. Congress also looks at ‘taxing’ the banks that may have made it past the initial problems. This penalizes banking entities that may have made rational decisions allowing them to survive. Note to Congress: We may still have problems with the hidden inventory that was caused by HAMP and all of the other restrictions placed on banks pursuing foreclosure.

Congress also didn’t seem to understand why the money to AIG was loaned to the parent vs just the insurance arm that handled CDS(s). The reason why you do this is so that AIG can’t shed their responsibility to the government money by shedding their subsidiary with the associated bonds. With the present structure, if AIG defaults on the bonds, the US government has the potential to own a good portion of AIG itself instead of just a problematic subsidiary. AIG has other parts of its business that are presently profitable.

[ucodegen]

The bank bailout just put money into the banks to recapitalize them. So rather than bailing out the banks I would rather they had been nationalized.

You need to look at history again. Allowing banks to fail and effectively be nationalized was part of what changed a potential late 1920’s recession to a full depression. One run on bank capitalization resulted in further runs on capitalization. The bank bailout will almost be completely paid back by the banks. The risk issues (currently) are AIG, FRE, FNM. I suspect the only real risk issue will be AIG.

The money on the Obama stimulus is not likely to be repaid by the recipients. You just have to hope to get it back through taxes.

The stimulus bill actually spends money into the economy to make work for the unemployed and create orders for businesses, which in turn create more jobs. Check with your economist friends.

This is arguable. There have been questionable ‘uses’ of this stimulus money as well as questionable allocation. This is why I feel better about the bank bailout where most of the money is being paid back vs. the stimulus package.

The stimulus, by increasing the deficit and debt, may cause long term problems, but it was appropriate to deal with the immediate economic downturn.

True.. the second half of using a stimulus is rarely done though. In times of plenty, government outlay has to be reduced and tax revenues increased. Unfortunately Congress, when it sees that it is getting flush with cash, likes to spend. A very good example is California’s legislature, which had huge cash inflows around 2000 from stock capital gains and towards the end of the Real Estate bubble from increases in property taxes and property sales taxes.

I’m not saying that Obama and the Democrats are perfect. But they’re much more preferable than the alternative.

Have to disagree with you here. I feel that both parties are the problem and they keep the populace arguing about fringe issues while the core goes to rot.

[ucodegen]

The bank bailout just put money into the banks to recapitalize them. So rather than bailing out the banks I would rather they had been nationalized.

You need to look at history again. Allowing banks to fail and effectively be nationalized was part of what changed a potential late 1920’s recession to a full depression. One run on bank capitalization resulted in further runs on capitalization. The bank bailout will almost be completely paid back by the banks. The risk issues (currently) are AIG, FRE, FNM. I suspect the only real risk issue will be AIG.

The money on the Obama stimulus is not likely to be repaid by the recipients. You just have to hope to get it back through taxes.

The stimulus bill actually spends money into the economy to make work for the unemployed and create orders for businesses, which in turn create more jobs. Check with your economist friends.

This is arguable. There have been questionable ‘uses’ of this stimulus money as well as questionable allocation. This is why I feel better about the bank bailout where most of the money is being paid back vs. the stimulus package.

The stimulus, by increasing the deficit and debt, may cause long term problems, but it was appropriate to deal with the immediate economic downturn.

True.. the second half of using a stimulus is rarely done though. In times of plenty, government outlay has to be reduced and tax revenues increased. Unfortunately Congress, when it sees that it is getting flush with cash, likes to spend. A very good example is California’s legislature, which had huge cash inflows around 2000 from stock capital gains and towards the end of the Real Estate bubble from increases in property taxes and property sales taxes.

I’m not saying that Obama and the Democrats are perfect. But they’re much more preferable than the alternative.

Have to disagree with you here. I feel that both parties are the problem and they keep the populace arguing about fringe issues while the core goes to rot.

[ucodegen]

The bank bailout just put money into the banks to recapitalize them. So rather than bailing out the banks I would rather they had been nationalized.

You need to look at history again. Allowing banks to fail and effectively be nationalized was part of what changed a potential late 1920’s recession to a full depression. One run on bank capitalization resulted in further runs on capitalization. The bank bailout will almost be completely paid back by the banks. The risk issues (currently) are AIG, FRE, FNM. I suspect the only real risk issue will be AIG.

The money on the Obama stimulus is not likely to be repaid by the recipients. You just have to hope to get it back through taxes.

The stimulus bill actually spends money into the economy to make work for the unemployed and create orders for businesses, which in turn create more jobs. Check with your economist friends.

This is arguable. There have been questionable ‘uses’ of this stimulus money as well as questionable allocation. This is why I feel better about the bank bailout where most of the money is being paid back vs. the stimulus package.

The stimulus, by increasing the deficit and debt, may cause long term problems, but it was appropriate to deal with the immediate economic downturn.

True.. the second half of using a stimulus is rarely done though. In times of plenty, government outlay has to be reduced and tax revenues increased. Unfortunately Congress, when it sees that it is getting flush with cash, likes to spend. A very good example is California’s legislature, which had huge cash inflows around 2000 from stock capital gains and towards the end of the Real Estate bubble from increases in property taxes and property sales taxes.

I’m not saying that Obama and the Democrats are perfect. But they’re much more preferable than the alternative.

Have to disagree with you here. I feel that both parties are the problem and they keep the populace arguing about fringe issues while the core goes to rot.

[ucodegen]

The bank bailout just put money into the banks to recapitalize them. So rather than bailing out the banks I would rather they had been nationalized.

You need to look at history again. Allowing banks to fail and effectively be nationalized was part of what changed a potential late 1920’s recession to a full depression. One run on bank capitalization resulted in further runs on capitalization. The bank bailout will almost be completely paid back by the banks. The risk issues (currently) are AIG, FRE, FNM. I suspect the only real risk issue will be AIG.

The money on the Obama stimulus is not likely to be repaid by the recipients. You just have to hope to get it back through taxes.

The stimulus bill actually spends money into the economy to make work for the unemployed and create orders for businesses, which in turn create more jobs. Check with your economist friends.

This is arguable. There have been questionable ‘uses’ of this stimulus money as well as questionable allocation. This is why I feel better about the bank bailout where most of the money is being paid back vs. the stimulus package.

The stimulus, by increasing the deficit and debt, may cause long term problems, but it was appropriate to deal with the immediate economic downturn.

True.. the second half of using a stimulus is rarely done though. In times of plenty, government outlay has to be reduced and tax revenues increased. Unfortunately Congress, when it sees that it is getting flush with cash, likes to spend. A very good example is California’s legislature, which had huge cash inflows around 2000 from stock capital gains and towards the end of the Real Estate bubble from increases in property taxes and property sales taxes.

I’m not saying that Obama and the Democrats are perfect. But they’re much more preferable than the alternative.

Have to disagree with you here. I feel that both parties are the problem and they keep the populace arguing about fringe issues while the core goes to rot.

[ucodegen]

The bank bailout just put money into the banks to recapitalize them. So rather than bailing out the banks I would rather they had been nationalized.

You need to look at history again. Allowing banks to fail and effectively be nationalized was part of what changed a potential late 1920’s recession to a full depression. One run on bank capitalization resulted in further runs on capitalization. The bank bailout will almost be completely paid back by the banks. The risk issues (currently) are AIG, FRE, FNM. I suspect the only real risk issue will be AIG.

The money on the Obama stimulus is not likely to be repaid by the recipients. You just have to hope to get it back through taxes.

The stimulus bill actually spends money into the economy to make work for the unemployed and create orders for businesses, which in turn create more jobs. Check with your economist friends.

This is arguable. There have been questionable ‘uses’ of this stimulus money as well as questionable allocation. This is why I feel better about the bank bailout where most of the money is being paid back vs. the stimulus package.

The stimulus, by increasing the deficit and debt, may cause long term problems, but it was appropriate to deal with the immediate economic downturn.

True.. the second half of using a stimulus is rarely done though. In times of plenty, government outlay has to be reduced and tax revenues increased. Unfortunately Congress, when it sees that it is getting flush with cash, likes to spend. A very good example is California’s legislature, which had huge cash inflows around 2000 from stock capital gains and towards the end of the Real Estate bubble from increases in property taxes and property sales taxes.

I’m not saying that Obama and the Democrats are perfect. But they’re much more preferable than the alternative.

Have to disagree with you here. I feel that both parties are the problem and they keep the populace arguing about fringe issues while the core goes to rot.

[ucodegen]

Missing appliances, hard to get funding. I still don’t understand why banks don’t spend the 3k for appliances and get 10% more for the property.

I would rather buy one missing the appliances than have someone put in some POS items just to get more out of me. I hate to have to junk perfectly good appliances to install the ones in that I want. I don’t think the banks would have much of a problem if you reserve sufficient funds for purchase of appliances.

People seem to forget that they need to look at a potential property and see what they want changed and what it would be worth at that point.. then work backwards to determine what you would pay for the property.

I also get nervous about a house that has been all ‘dolled up’ flipper style. I wonder what was overlooked and what shortcuts were taken.

[ucodegen]

Missing appliances, hard to get funding. I still don’t understand why banks don’t spend the 3k for appliances and get 10% more for the property.

I would rather buy one missing the appliances than have someone put in some POS items just to get more out of me. I hate to have to junk perfectly good appliances to install the ones in that I want. I don’t think the banks would have much of a problem if you reserve sufficient funds for purchase of appliances.

People seem to forget that they need to look at a potential property and see what they want changed and what it would be worth at that point.. then work backwards to determine what you would pay for the property.

I also get nervous about a house that has been all ‘dolled up’ flipper style. I wonder what was overlooked and what shortcuts were taken.

[ucodegen]

Missing appliances, hard to get funding. I still don’t understand why banks don’t spend the 3k for appliances and get 10% more for the property.

I would rather buy one missing the appliances than have someone put in some POS items just to get more out of me. I hate to have to junk perfectly good appliances to install the ones in that I want. I don’t think the banks would have much of a problem if you reserve sufficient funds for purchase of appliances.

People seem to forget that they need to look at a potential property and see what they want changed and what it would be worth at that point.. then work backwards to determine what you would pay for the property.

I also get nervous about a house that has been all ‘dolled up’ flipper style. I wonder what was overlooked and what shortcuts were taken.

[ucodegen]

Missing appliances, hard to get funding. I still don’t understand why banks don’t spend the 3k for appliances and get 10% more for the property.

I would rather buy one missing the appliances than have someone put in some POS items just to get more out of me. I hate to have to junk perfectly good appliances to install the ones in that I want. I don’t think the banks would have much of a problem if you reserve sufficient funds for purchase of appliances.

People seem to forget that they need to look at a potential property and see what they want changed and what it would be worth at that point.. then work backwards to determine what you would pay for the property.

I also get nervous about a house that has been all ‘dolled up’ flipper style. I wonder what was overlooked and what shortcuts were taken.

[ucodegen]

Missing appliances, hard to get funding. I still don’t understand why banks don’t spend the 3k for appliances and get 10% more for the property.

I would rather buy one missing the appliances than have someone put in some POS items just to get more out of me. I hate to have to junk perfectly good appliances to install the ones in that I want. I don’t think the banks would have much of a problem if you reserve sufficient funds for purchase of appliances.

People seem to forget that they need to look at a potential property and see what they want changed and what it would be worth at that point.. then work backwards to determine what you would pay for the property.

I also get nervous about a house that has been all ‘dolled up’ flipper style. I wonder what was overlooked and what shortcuts were taken.

[ucodegen]

I disagree that construction quality is lower now. The building codes have become ever tougher over the past 50 years.

Building codes and quality are two different things. More houses these days are off-square, walls are actually not straight (this is why they use ‘knock-down’ texture. It hides this. Walls in the 60’s and earlier were smooth surface. Any unevenness would show up). Now, if they can get away with skipping code, they do. Code and code inspection keeps the builders honest. Remember that in the 60’s, the building code was much simpler. What would be the quality of those houses if the builders took the same approach to building that they do now?

The codes today, have made a more structurally sound and electrically safer house, but the quality put into the actual construction itself is lower. Note: In 1960 and earlier, 2×4 was 2×4. It is now 1.5 x 3.5, and I ran across some that were 1.5 x 3.25. Plywood used to be used, now it is OSB.

[ucodegen]

I disagree that construction quality is lower now. The building codes have become ever tougher over the past 50 years.

Building codes and quality are two different things. More houses these days are off-square, walls are actually not straight (this is why they use ‘knock-down’ texture. It hides this. Walls in the 60’s and earlier were smooth surface. Any unevenness would show up). Now, if they can get away with skipping code, they do. Code and code inspection keeps the builders honest. Remember that in the 60’s, the building code was much simpler. What would be the quality of those houses if the builders took the same approach to building that they do now?

The codes today, have made a more structurally sound and electrically safer house, but the quality put into the actual construction itself is lower. Note: In 1960 and earlier, 2×4 was 2×4. It is now 1.5 x 3.5, and I ran across some that were 1.5 x 3.25. Plywood used to be used, now it is OSB.

[Author]

Posts