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Main Street's Bailout Backlash

[My story in today's paper.]

It sounds to me like Wall Street was operating a Ponzi scheme in which it kept selling and re-selling debt, making profits, boosting the stock price -- so long as the housing market continued bubbling along. Rising housing prices perfumed the entire enterprise. But bubbles never expand forever. You know what happens. And that's why Ponzi schemes aren't a good way to run an economy. (One of my neighbors said last night that he's heard that there's now a booming securities market in bets that the Treasury will go into default. Could that be true? Pass along rumors!)

[Good column by Stanley Bing in Fortune.]

[This guy is amazing: Check out the first photo of Knowshon Moreno flying into the end zone in the GA-ASU game. I haven't seen moves like this since Jack Kirby was drawing comic books.]

--

Boodler bc remembers boodler Error Flynn.

--

Gas prices going up again as oil spikes $25 a barrel in a single day.

--

I have found this to be a very interesting blog on real estate matters: "... the blogs that concentrate on the economy are urging a letter writing campaign to halt RTC 2.0. They are in high dudgeon about matters of principle." Lots of links from here to other econ blogs, including this one.

Krugman doesn't like the bailout plan.

.

By Joel Achenbach  |  September 22, 2008; 7:53 AM ET
 
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Comments

Shortest Kit ever? :-)

Posted by: Scottynuke | September 22, 2008 8:03 AM | Report abuse

Kbertocci can confirm if there is a shorter one.

Posted by: Shiloh | September 22, 2008 8:11 AM | Report abuse

Anyone mind if I take a snooze on the couch in the bunker? We didn't get home from Saturday's marching band competiton until around 1.30 a.m. on Sunday and I'm sitll a bit sleepy. I wonder how the feelings of resentment referred to in the Boss' article will translate at the polls. Sen Obama was in the Queen City yesterday. Attendance was estimated at 20K. Interesting. Frank Rich wrote a good column on truthiness in the Sunday NYT that's worth the read.

Posted by: jack | September 22, 2008 8:22 AM | Report abuse

Repost from last kit:

At a happy hour party down the street from my boss, the host was complaining that his neighbor has had his $700,000 house for sale all summer but made no arrangements for yardwork. By agreement, he started mowing the yard for the guy and is being stiffed for about $300 so far. At $40 bucks a mow, that is some petty cash management.

New material:

The above anecdote shows how housing free-fall is pitting neighbor against neighbor. The talk at this party was about a house that a guy had bought for $700k and put a ton of improvements into has been reduced to an asking price of $639k.

The answer is massive hyper-inflation to dilute the value of these DOA loans and flood the market with cash. Housing prices, which will still decline in real cost, will make paper profits each time they get flipped.

By the end of the decade the $100 dollar bill will be trading on par with the 10,000 dong note.

Our Chinese absentee landlords won't be happy, but what choice do they have? Nobody else wants their lead-painted toys. And the domestic market for melamine milk is collapsing. Hey, all those pet food manufacturers had to off-load their stockpiles somewhere.

I'm taking out as many fixed rate long-term consumer loans as I can pronto. And investing in wheelbarrows. So I can carry home my hyper-inflated paycheck. Provided I still have one.

Posted by: yellojkt | September 22, 2008 8:26 AM | Report abuse

jack,

Been there, buddy. Sleep is not an option for band parents.

Posted by: yellojkt | September 22, 2008 8:27 AM | Report abuse

" His mother, he says, snapped up a property down the street several years ago, only to be surprised when the mortgage proved adjustable, the interest rate rising so quickly that in two years the monthly payment went from $1,600 to $3,000."

Anyone should have able to see the impaact of such a large increase in monthly payments. If the mortgage lenders didn't clearly explain that this was going to happen they should be charged with fraud or at least be ridden out of town on a rail.
See my choice selection of rails at www.rails_r_us.net. I also give deep discounts for bulk orders of tar and feathers.

Posted by: Boko | September 22, 2008 8:37 AM | Report abuse

Tell me, yello. I was driving the bus.

The debate this coming Friday whould be interesting. As I understand the rules for this particulat tete-a tete, the moderator reserves the right, at his/her (I don't know who the moderator is...) discretion to sit back and let the debate fly. Rich's Sunday column discussed many examples of how the McCain campaign has been working, and how the MSM seems to be giving the campaign a pass on some issues: health records and tax returns are discussed. In addition, the campaiogn has utilized the well worn strategy of repeating what amounts to a lie to sway the public. Many potential voters polled after the GOP convention are convinced that Obama, if elected, will raise taxes on the middle class. I'm hopeful that Sen. Obama is successful in making the point that Sen. McCain was for deregulation for over 20 years before he was for it. I might expect that Sen. McCains role in the Keating stuff might be mentioned, at least in the context that Sen. Mc Cain played a role in creating the legislation that deregulated the S&L industry.

Posted by: jack | September 22, 2008 8:43 AM | Report abuse

Floods, Money and politics

Word frequencies taken from boodle comments since Joel's kit "Eye of the Hurricane" published on Set 5, 2008.

0 windbag
5 Biden
7 beer
9 taxes
10 wine
16 drink
17 dollar
17 investment
19 wave (11 from Scottynuke)
21 democrat
21 stock
23 flood
29 Wall Street
29 weather
36 republican
37 wind
40 economy
55 market
58 hurricane
59 Obama
63 rain
65 water
70 house
75 money
81 McCain
91 home
102 Palin

Posted by: kitchen counter | September 22, 2008 8:47 AM | Report abuse

The play "Loyal Women" by Gary Mitchell includes a living-room tarring an feathering. I got the feeling that the real thing would be nasty.

Posted by: Dave of the Coonties | September 22, 2008 8:53 AM | Report abuse

kc,
How did "tomatoes" and "tee shirt" not make the cut?

Posted by: yellojkt | September 22, 2008 8:55 AM | Report abuse

yellojkt, I couldn't work tomato or teeshirt into the topic. Maybe next week.

Posted by: kitchen counter | September 22, 2008 9:04 AM | Report abuse

If folks around D.C. are far less than enthusiastic about the governnment's proposed bailout package of financial institutions, economist Paul Krugman at the NYT isn't very happy either. His column today is worth a read. Note the very clever terms he uses to describe Paulson's proposed rescue plan: "cash for trash," "Authorization for Use of Financial Force," and the "paradox of deleveraging.”

Krugman writes:

"Or rather, it [the financial system] will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?"

Should the government just print more dollars, more funny money, to get us over the hump of this finacial meltdown? More profits, surely, for my family, the Cranes of Dalton, Mass., who supply the paper for our paper currency?

Count me among the unhappy as well.


Posted by: Loomis | September 22, 2008 9:18 AM | Report abuse

Joel,

The biggest Ponzi Scheme, not to mention the large lumbering proboscidean in the room?

Social Security.

Just sayin'.

Posted by: yellojkt | September 22, 2008 9:18 AM | Report abuse

I'm a little conflicted about all this.

On the one hand, I understand that many sober economists feel that the taxpayer-funded bailout is essential to the global economy. Since global chaos is, in general, a bad thing, this seems money well spent. (Besides, I have read a few suggestions that this bailout might end up being a a de facto tax on the financial institutions involved.)

On the other hand, I share a bit of the righteous indignation of the financially upright towards those who foolishly took on far more than they could handle.

But then I return to Joel's observations regarding the Galveston residents who foolishly stayed in place. Compassion shouldn't be limited to the deserving.

Posted by: RD Padouk | September 22, 2008 9:18 AM | Report abuse

Good morning tout le Boodle.
Missed the dawn patrol this morning.
Had a busy time yesterday eating free lunch, visitng zoo, having tea with no tea in sight, but plenty of cognac. This was followed by cheese and cognac and then, free dinner of steak and wine.

Installing Boodle collision accelerator detector on my machine this morning.

Planning for a nap in the bunker later today.

Posted by: Brag | September 22, 2008 9:24 AM | Report abuse

kitchen counter;

Those were more written-out actions than words, yanno.

:-)

Posted by: Scottynuke | September 22, 2008 9:26 AM | Report abuse

But surely people investigate all the meanings of the words when they take out a mortgage? How could they be surprised if they did their homework?

I've never been comfortable with the idea of a contract where all the advantages belong to the other guy. Stung once (by the Farm Credit Corporation, a government agency, no less), not going to happen again.

Posted by: dr | September 22, 2008 9:29 AM | Report abuse

RD,

I'm suspicious that little if any of this bailout will trickle down to the upside-down mortgage holders hanging onto the gunwales for dear life. Instead, it will go to the bonds traders' yacht payments.

Posted by: yellojkt | September 22, 2008 9:32 AM | Report abuse

Joel's story has churned up a froth on Main Street as the "chattering classes" (-Ridley) post comments. The comments section (which will not load on my FF browser, but will on IE - Why?) may serve as an outlet for angry people, who are mostly incensed that "their" taxpayer dollars are being used to bail out the greedy rich and stupid poor.(Note: the two groups are rarely used in the same comment, suggesting that the greedy rich blame the stupid poor and vice versa.) The proudly middle class who pay their bills and didn't suck the equity out of their homes are screaming for a stop to the "bail out," mostly unaware that if the government doesn't intervene, the middle class is most in jeopardy, which they think is a TV quiz show.

Posted by: Shiloh | September 22, 2008 9:32 AM | Report abuse

Of course, you have to figure out how to apportion blame. When you have your average home owner who accepts a mortgage far greater than what he or she can handle, who is most at fault - the foolish homeowner or the idiot firm who approved the loan? Were such homeowners motivated by greed, or were they simply naive? And is it intrinsically evil for lenders to help people get into a house? Traditionally it is the cold-hearted banker who turns down a loan who is help up for derision.

Then there is, of course, the even higher level of financial shenanigans going on - what with the buying and selling of these questionable mortgages. Are these security traders to be punished for daring to try to make money, or should the government be blamed for failing to keep a close enough eye on things?

I really do not know. But, to me, it's sort of like when a general takes charge of a battlefield. It doesn't really matter whose fault the war is. The important thing is to try to limit the carnage.

Posted by: RD Padouk | September 22, 2008 9:38 AM | Report abuse

dr,

I'm a pretty savvy person, but I doubt I have read most of the fine print in my mortgages. The predatory lending practices that flourished in the sub-prime market are legendary. Some people I know love their ARMs, but it's an easy way to profiteer amongst the unwary. It's all in the indexing.

My first mortgage at the end of the 80s was a 2-1 buydown with the interest rate hitting 11% within two years. Then I lost my job and had to unload. It was an assumable FHA loan which let me actually make a small profit by taking back a 12 month balloon payment from the buyer. He paid me, re-financed the loan, and we all walked away happy.

Now I have a 5.875 fixed first and a floating HELOC that I can't bring myself to pull the trigger on the fixed rate conversion clause because the rates are staying so low.

Posted by: yellojkt | September 22, 2008 9:39 AM | Report abuse

g'morning boodle. Boy does JA's story in today's paper hit home. Back in '94 Bloom's Crossing, in Manassas Park, was just getting going and we liked the idea of living so close to the then proposed, since built, new VRE station. As it happened the prices even in that depressed housing market were out of our range. Instead we bought in Woodbridge where things got really crazy.

How could people not see it coming? In '05 Mr. F was in Kuwait when we decided to sell the house. In January I talked to a realtor and she suggested a price 50k over what I thought the market would bear for our 11 year old brick front colonial on .29 acres, by April we listed it for 50k over that January price and had it sold without even an inspection contingency in 24 hours.

I suppose we have W to thank for the frostfam's good fortune. If I had been less disgusted with the administration, and more hopeful about Mr. F's chances of not returning to Iraq and Afghanistan perpetually, he would have lobbied for a Pentagon or other NoVA job on his return from overseas. I would have stayed in a job I loved, but our paper profits would have evaporated and we'd be mowing foreclosure yards all weekend just to keep the neighborhood looking occupied.

Posted by: frostbitten | September 22, 2008 9:45 AM | Report abuse

Shiloh - I can't see comments with FF either. I just get the oscillating ring of eternity. At home I have downloaded Chrome just for the purpose of seeing WaPo comments.

yello - you might be right. It is all pretty confusing just who is being "bailed out," who will directly benefit, and who will not. My point is just that it seems miserly to only feel compassion when it doesn't cost anything.

Posted by: RD Padouk | September 22, 2008 9:46 AM | Report abuse

One other thought about the bailout. I have seen the figure $700B tossed around with great outrage. But the US Stock Market alone is worth something like 15T - give or take a few trillion. And the world markets much more. The US markets lost $700B last week on *one* day.

$700B could be a pretty cheap price to stave off a global depression. The question is if it will really work.

Posted by: RD Padouk | September 22, 2008 9:51 AM | Report abuse

It's nice to see the good people at Lehman Bros. are taking care of no. 1 first. The greedy b@stards ran the company into the ground but set out a special "protected fund" of $2.5 billion dollars for bonus and guaranteed contracts for key and essential personnel. It just happens that key and essential personnel are all US-based. Lehman's Rest of the World personnel are not amused.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4795072.ece

Posted by: shrieking denizen | September 22, 2008 9:56 AM | Report abuse

I feel bad for people tricked into bad loans. I feel bad for people who through misfortune (illness, job loss, etc.) cannot afford their homes anymore. I feel bad for first-time home-buyers priced out of affordable housing. I feel bad for the clerical and administrative employees of large financial corporations that are balancing the books on the back of the workforce.

I do not feel bad for the plutocrats and cronies that have turned usury into national industry. I reserve a special place in he11 for the person that invented the concept of universal default on credit card terms of agreement. A forgotten payment on a closed department store card shouldn't raise the rate on my other credit cards to 29.99%.

Posted by: yellojkt | September 22, 2008 9:59 AM | Report abuse

NPR had an interesting piece this morning on how Japan climbed out of its economic crash, after 20 years. The Japanese economist they featured (didn't catch his name) attributed the general success of their system in handling what could have been a death blow to massive government spending on infrastructure. The government took on mounds of debt, but the personal savings rate shot up (and it was already high)and the GDP never dipped so people stayed employed.


Posted by: frostbitten | September 22, 2008 10:04 AM | Report abuse

As a real estate agent plying his trade in the trenches (Miami is the Baghdad of foreclosures), I think our mess is a combination of greed and outright fraud. Most of what I do now is foreclosure sales in Homestead, about twenty miles south of Miami. Six or seven years ago, what is now literally thousand upon thousands of ticky-tacky, side-by-side townhomes and crammed together “zero lot line” homes, was tomato, potato, bean and strawberry fields. Homestead was the winter vegetable capital of the world. The economy was roaring, agricultural land was cheap and people wanted “affordable” housing. The politicians, in the thrall of the developers, said sure, go ahead and flatten those fields. So they did and where vegetables once grew housing sprouted. Cheaply built cookie-cutter housing. With no additional infrastructure to handle the traffic or enough schools. People were pushed into adjustable mortgages with low initial payments and told not to worry about the re-set because they could always refinance because the houses would be worth more every year. People, “flippers”, hoping to profit from the boom bought five or six houses at a time. The market peaked in December of 2005; the mean sales price for single family homes has declined 30% since then and has more to go. We now have 85,000 single family homes and condos for sale in Miami-Dade and Broward Counties. At the rate they’re selling, that’s a five-year supply. I sold a three-bedroom three-bath condo for $171,000 that two years ago someone bought for $300,000. He was a real estate agent who owned several of the units. Now he owns nothing and the bank lost money on all his properties. I just sold another 3/3 for $125,000 that two years ago a family paid $240,000 for and then he lost his job and the adjustable went up and then they just walked away from the house. Leaving the kids toys behind along with a whole bar full of liquor. One of my listings is for a townhome that was purchased by a young musician and his wife and lived in with their two kids. Three years ago he paid $260,000 and had two mortgages for 100% financing. This was a guy without a job playing Mariachi gigs and two different banks gave him $260,000. We have a “keys for cash” program where we offer the previous owners still living in property they don’t own a payment to vacate because that’s cheaper than evicting them. I met him in a Wendy’s, had him sign an agreement and then met him at his ex-house to get the keys, inspect the property and make sure he didn’t trash anything. (Lot’s of people trash the place, they rip out wires, leave the water running, break windows, kick in cabinets. He and his family didn’t--they even vacuumed the carpets. He was happy to get his $1,000 and would use it along with the mortgage payments he had saved by not paying them for the last year to start a new life in a rental. Seven years from now he’ll be able to buy something else. The people I feel sorriest for are the neighbors of these foreclosures. They paid the same as the people who’ve gone and now their property is worth exactly what I sell the foreclosures for. About half. But they’re still there, making their payments and supporting the whole townhouse complex maintenance with about half the residents. It’s all a heartbreaking mess.

Posted by: miamibob | September 22, 2008 10:05 AM | Report abuse

That "oscillating ring of eternity" RD, beautifully describes a non-functioning FF browser - but also brings to mind a chilling reminder of the LHC and the "last days" possibility of the same thing for the planet. The phrase would fit nicely on a signboard, as "Beware: The oscillating ring of eternity." That might scare the stuffing out of a few nonbelievers - in science or religion, take your choice.

Posted by: Shiloh | September 22, 2008 10:07 AM | Report abuse

Thank you miamibob. Nothing like hearing a report from the front lines.

Posted by: RD Padouk | September 22, 2008 10:08 AM | Report abuse

"I reserve a special place in he11 for the person that invented the concept of universal default on credit card terms of agreement."

That spot should be right next to the person who wrote up the terms of agreement to deliberately obfuscate the concept.

Posted by: frostbitten | September 22, 2008 10:08 AM | Report abuse

miamibob-worthy of a guest kit, thanks.

Posted by: frostbitten | September 22, 2008 10:16 AM | Report abuse

yello... it ain't just the interest rates.

Figure in the late payment fees at $20-$30 a pop, the $20-$30 "talk to a person" fees for calling them to make payment arrangements, then another $20-$30 for making a payment by phone because they won't let you pay online because you're three days late. And lest I forget, the overlimit fee of another $20-$30 because all the fees they just charged you put your account over the limit.

So the $20 bill that was three days late is now $100 or more.

And they wonder why people don't pay their bills.

I'll be damned if I'm going to pay someone to accept my payment. Do they want the friggin' money or not?

btw... whatever happened to the "grace period" of anywhere from 7 days to a month most creditors used to honor? And postmarks? It used to be that as long as your payment was postmarked by the date due, there were no late fees. Now they tell you to mail it three months in advance to make sure it gets credited to your account in time.

I say EFF'em (and I've told'em so over the phone, though it cost me an extra $20).

Posted by: martooni | September 22, 2008 10:17 AM | Report abuse

Howdy. I agree with RD. It will be possible, eventually, to apportion blame. There's a lot of it to go around and we know where a lot of it belongs. Like most of us, I sympathize with the people caught in the mess and vilify the ones whose greed and intensely personal focus (loved that Stanley Bing column!!) got us here. However, I also believe the economists who say that we'd better do something before the whole thing collapses. My folks grew up in the Great Depression and instilled a great many valuable lessons in me which they learned the hard way. I'd prefer the Boy not have to re-learn those by living them.

I don't think Congress should give Treasury that blank check, though. I find it interesting that Paulson doesn't want any conditions put on the bailout terms (such as limits on executive compensation) because he doesn't want to scare the firms away. If things are as bad as we are told, and I have no reason to doubt it, don't these firms need to participate, to keep their position in the market or what's left of it? Would an across-the-board pay limit for the boss really mean more than the entire company's financial well-being?

I also liked the banking lobbyist quote in WSJ today warning against the greed factors involved in their lobbying hard against mortgage relief for homeowners (through bankruptcy judge discretion in particular cases: "Pigs get fat and hogs get slaughtered."

And no, dr, most people don't define the terms in their mortgage proposals, or even read the fine print. Looked at one way, this is slipshod and irresponsible. From another perspective it is entirely understandable. For one thing, most people don't understand the terms, math or principles involved and, quite frankly, some of the loan personnel don't either and don't explain it well. For another, we are accustomed to specialization. If you go to a lawyer or doctor, you accept their diagnosis and follow their advice. Many people treat complex banking transactions the same way, believing the advisors are acting in the interests of the them, the client. I believe this shows a fundamental misunderstanding of that relationship but it is a common delusion.

Posted by: Ivansmom | September 22, 2008 10:26 AM | Report abuse

Comment bot held my last one. I will calm down. Here's a blog about mortgage fraud http://www.mortgagefraudblog.com/
It goes back a ways.

To me, every time the price of crude goes up, the currency has just been inflated. A loaf of bread, a yard of concrete, and a new toaster just went up in price, even though salaries and wages don't jump up to keep pace.

We all have just been Enron'ed yet again, with complicity of the Bush admin.

Posted by: Jumper | September 22, 2008 10:27 AM | Report abuse

RD, I can see your point that perhaps we do have to fork over the $1T for a bailout. That remains to be decided by Congress in deliberate talks. We can no longer allow ourselves to be manipulated by this administration into "act now before it's too late!!! Be very afraid." Does anyone remember the lead-in to the Iraq war? Why must we write a blank check with no oversight and transparency?

Posted by: Wheezy | September 22, 2008 10:29 AM | Report abuse

I understand the resentment one might feel when one has paid her bills, bought a small house and lived within her means--and is now faced with bailing out neighbors who haven't been as responsible.

But one of the pressing market needs which was met by upgrading subprime mortgage securities was a need for "safe" investments for pension funds and 401(k)s. We now know they didn't meet the "safe" criterion, and in my opinion, the group of people who upgraded them and others who recommended them, knowing their basis, bear a great deal of responsibility for this crisis.

Although they didn't knowingly invest in subprime mortgages, the middle class who pay their bills and didn't suck the equity out of their homes (thanks, Shiloh) still have pension funds and 401(k)s, possibly personal portfolios, all still solvent because of the bailout. We should think about this before we start throwing stones because we benefit too.

Personally, I'd like to retire some day and I'm grateful.

Posted by: dbG | September 22, 2008 10:29 AM | Report abuse

I agree with dbG. I am grateful that I feel squeezed and not crushed.

Major mistake: to imagine the economy as a very large household.

Isn't it amazing how very linked we are by the sinews of money and finance infrastructures.

Hey, I am most saddened that so many act without a simple moral compass. And, the lemming-ness of us all.....to jump on the bandwagon of easy credit, easy money......etc.


Posted by: College Parkian | September 22, 2008 10:48 AM | Report abuse

dbG,
We vaguely had this same discussion several months ago. The securitization of sub-prime loans made us a nation of slumlords. You have to read a lot of fine print to even guess at what else your 401(k) holds. Eventually we all owe this money to ourselves. And the Chinese.

martooni,
While we are commiserating, as a safety measure I automatically make an electronic payment one week in advance to all my credit card accounts equal to the amount the minimum payment would be if the card were maxed out. Then one CC company moved the due date up ten days just to monkey with my system. It trigged $50 in silly fees and jacked up the rate 10 points.

I did a balance transfer and closed the account. I'm sure they had an statistical model that showed that the money they lost on me is more than made up by the other people they rip-off with these sleazy tactics.

Posted by: yellojkt | September 22, 2008 10:50 AM | Report abuse

Wheezy, I agree that there needs to be oversight and transparency. But if Congress uses this as an opportunity to wring every conceivable concession out of the administration and drags the discussions out so long that the markets lose faith in their ability to act, I will be beyond apoplectic. Yes, the administration let this thing become a horrible mess. But let's not compound the problem.

One of the lessons from Japan was the price of unduly delaying action.

Posted by: Raysmom | September 22, 2008 10:51 AM | Report abuse

Yello: Smart move. I have helped friends do the same and cautioned them about being timely and not buying into "minimum payments." I personally use only a debit card, but understand the practical side for those with more obligations than cash. I get credit card offers daily in the mail and on line, some for preposterous six figure lines of credit, but alway read the extremely fine print and gulp at the inherent usury before pitching the offers in the trash.

Posted by: Shiloh | September 22, 2008 10:57 AM | Report abuse

'Morning, folks.

No offense to anyone in particular, but I get the feeling from a lot of the comments that most of you folks don't understand the whole mortgage problem, which comes in two parts.

The first part is that the healthy majority of mortgage loans are/were pretty straight-forward and reasonable. However, a certain percentage were NOT, for one reason or another. Although there are of course a few anecdotes and horror stories about people being "tricked" into bad loans, I'm pretty certain this didn't happen too much, and I'm dead certain that although there were some such cases, there weren't NEARLY enough of them to have caused this crisis.

Instead, there are a great many cases where the nature of the type of loan *was* explained to the buyers, who very often ignored the information, for a variety of reasons (we all tend to ignore the "fine print"; naivete, "it can't happen to me," "it will all work out," "they wouldn't be offering me this loan if they didn't know what they were doing," "the economy will remain OK, so there's no reason I won't be able to keep up payments," and the largest one of all: "I want that house.")

So one smaller aspect is the buyer who isn't paying very much close attention versus the mortgage dealer who doesn't very much care, but wants to get paid for selling the mortgage, whatever it takes. And since there was nothing illegal about any of this, why worry about it? There is nothing prima facie illegal about selling a poor product to a dumb customer. Happens all the time.

However, a little more attention needs to be focused on the "bad" loans, both by type and by the buyer's qualifications. A fair percentage of the bas stuff came in what were called "low-documentation" loans, "no-document" loans, etc., dubbed by some people in the industry as "liar loans." In these, all you had to do was walk into a mortgage office, claim that yes, you made $170,000 and could afford such-and-such a house payment. Nobody checked your credit, nobody asked to see your three last pay stubbs or checked with your company HR dept., etc. Your "word" was good enough, and you got the loan.

This was absurd on the face of it -- but the blame needs to be equally shared by the mortgage company on the one hand, and the buyer, who in most cases was smart enough to know there was something wrong here. The people who knowingly went after liar loans did so knowing their credit history was bad and they couldn't possibly get a house through an "honest," properly qualified loan.

This is where lack of industry regulation, as well as lack of industry oversight (hello, Republicans) comes in for blame: liar loans should never have been allowed to exist in the first place. Liar loans can ONLY exist in an environment where the mortgage company knowsw it can make money from the commission on the mortgage to the buyer-- and then turn around and sell the "bad paper" to somebody else. If every mortgage company knew it had to keep its own bad paper, they'd have never allowed liar loans in a million years, nor any of the other kinds of marginal loans.

So here the blame is actually split three ways: the buyer, the mortgage company, and the system/regulators/industry oversight.

There were also a large class of people who got "bad loans" but who were reasonably honest, iformed and well-meaning -- but got screwed anyway. Among these are the adjustable rate mortgages (ARMs), balloon loans, bridge loans, and "interest only" loans (where you get a low monthly payment because you are only paying the monthly interest, and never paying down the principle). Many of the buyers were duly informed of the consequences of the loan and adequately understood what they were doing. And the loans themselves were inherently legal and often served good purposes (bridge loans, for example). However, what all of these kinds of loans required was basically faith in the future and the belief and hope that the housing market would continue to thrive. Most people understood these loans only "worked" when the market was increasing--and no one believed the housing bubble would either (a) collapse or (b) collapse before "my" ARM or balloon came due. "Sure, maybe it will collapse ten years from now, but it won't collapse this year, and in two years I'll be clear, so it won't matter to me after that." (Wrong.)

So there was nothing "wrong" or illegal/immoral with these loansw-- as long as the staus quo existed. So then you have to make a judgment call about the intelligence or "stupidity" or "greed" of someone who only believes the future will be better, not worse, than it is now. And that's a tough call to make. People ought, generally speaking to be hopeful and optimistic about the future. And this is also true of anyone who buys a house even using a convention mortgage: you can't buy a house if you believe you're going to be laid off in a year and that a tornado or a hurricane is going to obliterate your property. You have to have a certain amount of confidence.

I have no idea what the proportion of "good" mortgages to "bad paper" is/was, and it really doesn't matter, whether it was 98% good and only 2% bad, or 80% good and 20% bad. It's like saying 98% of your body is cancer-free, or only 2% of your leg has gangrene and the rest of it is just dandy. Whatever the "bad" proportion was, it was too much for the sysmtem to handle.

And here's the other half: the system not only handled it badly, the system was corrupt, insofar as it was deregulated and there were no rules, no oversight. This is where the accusations of the Wall Street Ponzi scheme come into play: Wall Street figured out a way to make money bvy buying and selling all these bad packaged loans, getting the commission on the transfers and selling the risk to some fall guy at the end of the line. This should have never been allowed to happen -- but nobody is regulating Wall Street, because it is 'the market" and there is all that crap about letting the "invisble hand" jerk itself off, etc.

I have no opinion about the methods or probability of success of the bailout; I haven't read enough about it. But I am bitterly, bitterly amused by all these g--d--- "situational" libertarians who are opposed to any government interference....except of course in emergencies like this one. It's like saying you don't believe in the fire department except when your house is on fire. But then there are other "true" liberatrians who don't believe in the fire department, refuse to call for help -- and are happy to let the house burn down in order to keep their precious principles intact.

One part of the problem is this: Wall Street and "business" think that what they do belongs to them, (they and their stockholders, etc.). But they are wrong: the economy belongs to everyone, to the country as a whole. It is ion one sense a public trust, and it isn't just Wall Street's prerogative to eff it up hiowever it please. Wall Street is NOT allowed to muck up the country and the economy, and put the nation at risk, thank you very much. But that's what they've been allowed to do.

Here endeth the sermon...for now.

'Morning, Cassandra.

Posted by: Curmudgeon | September 22, 2008 11:00 AM | Report abuse

Thanks, miamibob, for the first-person account. I hope things improve for you and your area.

Last week marked the 15th anniversary of my moving into my current home. If I still had the original mortgage, I'd be halfway done. We've refinanced twice, both times to lower the rate. The financial planner we had at the most recent refinance had us open a mutual fund account to put the difference between the old payment and the new, with the thought that we could pay down the mortgage with the profits. Of course, increases in escrow costs have destroyed the difference, and the mutual fund account hasn't grown either. Fortunately, even in these distressing times, the house is worth much more than I paid for it, and much more than the mortgage. It's the only debt we have.

Posted by: slyness | September 22, 2008 11:05 AM | Report abuse

Wow, Mudge. I like waht you said at the end:

the economy belongs to all of us AND

public trust underlies this.

Guess we better re-examine trust and faith. And, apply the Reagan doctrine of trust and verify PLUS polish a bit of Teddy Roosevelt's big stick.

Posted by: Anonymous | September 22, 2008 11:07 AM | Report abuse

I hate to tell you, anon, but "trust but verify" translates to "don't be an idiot." Reagan didn't invent that.

Posted by: Jumper | September 22, 2008 11:13 AM | Report abuse

Mr. Achenbach, I am just a regular Schmoe out here, paying my home on time, in a Middle Class Middle State. As an old soldier, I have buried one friend from Mogadishu, and three from 9/11. One of them had taken my job. God bless their families.

I can deal with facing an IED. I can deal with losing buddies. I had a fair chance in every fight.

But what has kept me up every night is seeing my kids' futures going up in smoke, while a Wall Street CEO cashes in, with impunity. There is no fair chance.

What do we tell our kids anymore?

Play fair? Share? Keep your nose clean?

I'm sick, with nausea, watching each day, a schoolteacher struggling to get by, while we have 35 year old Sons of Westchester, retiring in luxury.

I'm sick seeing my choices as being three Senators and the Hot Mom Moose Hunter of Faraway, Alaska.

Mr. Achenbach, I just want to thank you for making us laugh, thinking about regular folks and providing some balance to this insanity.

I just think that we do have Two Americas, the Rich and the Poor. And it's not going to get any better by voting in an UberDork or Chuck Norris's standin.

Is secession from the coasts lawful?

Can we have SCOTUS order the Democratic and Republican Parties combined as one big Limousine Liberal Country Club Conservative consortium?

Cause, somehow, this Rangel guy with Four primary residences and McCain mope who is not exactly sure how many houses he has, they're not doing it for me anymore.

If we write you in, will you accept?

Posted by: Last Dude | September 22, 2008 11:17 AM | Report abuse

Yep, Mudge. That's it. I understood exactly the mortgage/housing meltdown problem, and I understand, insofar as it is possible from news reports (WSJ is pretty good on this) how it affected the larger financial system, resulting in the current credit crisis. I also understand that the financial/credit crisis is now about much more than those original bad loans and the good loans which are rapidly going into default after the bad. I hope that Congress makes sure any public assist has some teeth in it, sets some conditions for participation (limiting executive pay is a great start) and involves serious restructuring and regulation.

It is interesting that already, in just a few short weeks, there are no more independent investment banks. They all are with or looking for commercial banking partners - you know, the ones with actual money. This suggests to me that Wall Street is already adapting to changed circumstances. I hope it gets lots of strict encouragement to continue adapting rather than trying to rebuild its previous structure.

One thing that made me very angry (again, Stanley Bing was great about this) was Wall Street's exclusive focus on companies and corporations as existing for the good of the investors, with a complete disconnect from the idea of companies as a place of employment and generator of things or ideas. As Mudge says, the economy wasn't all about Wall Street investors. A pox on the folks who let them hijack it.

Posted by: Ivansmom | September 22, 2008 11:33 AM | Report abuse

mudge,
Great non-rant. Two coworkers were arguing how so few loans going bad could cause such chaos. There are a lot of multipliers built into the system. What we need are more shock absorbers.

slyness,
Rising property values and the ensuing property taxes are just as toxic to the responsible fixed-rate 30-year plus a little extra borrower as an ARM. A lot of retirees and fixed-income people get priced out of their neighborhoods and then taxed out of their houses.

Last Dude,
If nominated, Joel will not run. If elected, he will not serve. The official Boodle candidate is Error Flynn.

Error in '08.

Posted by: yellojkt | September 22, 2008 11:33 AM | Report abuse

Last Dude, at least you know you are not alone: Mr. Achenbach has lots of admirers here who think the White House could use a dose of his humor, intelligence, and insights. Heck, I'd be glad if they just made him press secretary. Or speechwriter. I like Joel too much to wish the job of President of the U.S.on him.

Posted by: kbertocci | September 22, 2008 11:35 AM | Report abuse

I hear you, Last Dude.

Some of us are considering moving right next door to the Boodlers in Haute Maine, otherwise known as Canada.

Posted by: dbG | September 22, 2008 11:35 AM | Report abuse

Anon, I'd like to take Teddy's big stick and bash in Ronald Reagan's head with it. He started this mess.

Also, I might point out -- and hope miamibob will verify -- that in many cases, real estate agents and realtors such as he (and my wife) usually have very little and often have nothing to do with the mortgage end of a real estate deal. Often the buyer comes in with his/her own mortgage company lined up (or in negotiation). In other cases, the buyer may not have a mortgage broker lined up, and may agree to receiving siggestions from a realtor about who is "good" and who isn't (but they have to be VERY careful how they phrase it). There shouldn't be -- and almost never is -- any sort of financial relationship between the mortgage firm and the realtor. However, some of the giant chain-store real estate companies have their own "in-house" mortgage units, and realtors are "encouraged" to refer clients to them. However, no buyer is *ever* required to use such-and-such a mortgage broker (although I suppose it does happen that people are "steered" so strongly they never know otherwise; this is disreputable and should be reported).

On the other hand, good realtors *do* try to pre-qualify customers to see how much they can afford. how their credit is, in part because it is a massive waste of time and gasoline to schlep around a customer who has lousy credit, wants too much house for their income, etc.

Most of the time (what would you say, Bob, two-thirds? three-quarters?) the buyer is reasonably frank and candid with the realtor, but my wife has had a fair number of clients who come in and won't discuss their credit and mortgage situations. Some say a variation of "Don't worry about it; my cousin Larry works for a mortgage outfit; he's taking care of it for me." (And if you know Larry's company is bad news, there ain't much you can do about it; you sure can't tell the client.) Others are sneaky and trying to pull something, or are excessively paranoid and worried about "privacy." Some say they found this "great" mortgage "on the Internet" (my wife *hates* these; they almost always turn out badly, but she can't say much to the client).

Some clients/buyers are just plain crazy; every experienced realtor has had a few. There are a lot of nut jobs wandering around loose out there. But I probably don't have to tell you that.

Posted by: Curmudgeon | September 22, 2008 11:35 AM | Report abuse

Achenbach in 08!

Posted by: TBG | September 22, 2008 11:36 AM | Report abuse

Howdy Last Dude. You express it very well.

Posted by: Ivansmom | September 22, 2008 11:37 AM | Report abuse

Anon, I'd like to take Teddy's big stick and bash in Ronald Reagan's head with it. He started this mess.

Also, I might point out -- and hope miamibob will verify -- that in many cases, real estate agents and realtors such as he (and my wife) usually have very little and often have nothing to do with the mortgage end of a real estate deal. Often the buyer comes in with his/her own mortgage company lined up (or in negotiation). In other cases, the buyer may not have a mortgage broker lined up, and may agree to receiving siggestions from a realtor about who is "good" and who isn't (but they have to be VERY careful how they phrase it). There shouldn't be -- and almost never is -- any sort of financial relationship between the mortgage firm and the realtor. However, some of the giant chain-store real estate companies have their own "in-house" mortgage units, and realtors are "encouraged" to refer clients to them. However, no buyer is *ever* required to use such-and-such a mortgage broker (although I suppose it does happen that people are "steered" so strongly they never know otherwise; this is disreputable and should be reported).

On the other hand, good realtors *do* try to pre-qualify customers to see how much they can afford. how their credit is, in part because it is a massive waste of time and gasoline to schlep around a customer who has lousy credit, wants too much house for their income, etc.

Most of the time (what would you say, Bob, two-thirds? three-quarters?) the buyer is reasonably frank and candid with the realtor, but my wife has had a fair number of clients who come in and won't discuss their credit and mortgage situations. Some say a variation of "Don't worry about it; my cousin Larry works for a mortgage outfit; he's taking care of it for me." (And if you know Larry's company is bad news, there ain't much you can do about it; you sure can't tell the client.) Others are sneaky and trying to pull something, or are excessively paranoid and worried about "privacy." Some say they found this "great" mortgage "on the Internet" (my wife *hates* these; they almost always turn out badly, but she can't say much to the client).

Some clients/buyers are just plain crazy; every experienced realtor has had a few. There are a lot of nut jobs wandering around loose out there. But I probably don't have to tell you that.

Posted by: Curmudgeon | September 22, 2008 11:58 AM | Report abuse

Mudge - now it's my husband agreeing with you. Just last night he was saying that this all began with Mr. Morning in America himself. Deficit spending, etc.

Hi miamibob and Last Dude.

Posted by: Kim | September 22, 2008 11:58 AM | Report abuse

mudge,

A lot of Realtors aren't mortgage brokers, but do work hand in glove with them. No loan, no sale. The bigger the house, the bigger the commission. They have an incentive to upsell the customer. And Realtors work for the seller, not the buyer.

My biggest geezer peeve is that what qualifies as a starter home nowadays is nicer than the house my parents lived in after twenty years of trading up. We have much higher expectations than we used to which accounts for a lot of the housing stock being built. The invisible hand works a lot of ways.

Posted by: yellojkt | September 22, 2008 11:58 AM | Report abuse

mudge,

A lot of Realtors aren't mortgage brokers, but do work hand in glove with them. No loan, no sale. The bigger the house, the bigger the commission. They have an incentive to upsell the customer. And Realtors work for the seller, not the buyer.

My biggest geezer peeve is that what qualifies as a starter home nowadays is nicer than the house my parents lived in after twenty years of trading up. We have much higher expectations than we used to which accounts for a lot of the housing stock being built. The invisible hand works a lot of ways.

Posted by: yellojkt | September 22, 2008 11:58 AM | Report abuse

Most Realtors work hand in glove with a mortgage broker. No loan, no sale. And the bigger the house, the bigger the commission. That's a big incentive to upsell.

Posted by: yellojkt | September 22, 2008 11:58 AM | Report abuse

*faxin' Movable Type some WD-40* :-)

Posted by: Scottynuke | September 22, 2008 12:04 PM | Report abuse

My company's policy is that buyers must sign a document saying that they understand that, while we are a subsidary of company that also does mortgages, they may or may not use our services in that regard. All of our mortgage brokers are licensed, unlike many here. In Florida, as you may have heard, the Miami Herald discovered that literally hundreds of convicted felons were brokering mortgages with no supervision from the state government.

Posted by: Anonymous | September 22, 2008 12:07 PM | Report abuse

I loathe credit card companies. When I was a bankruptcy trustee back in the dim, red dawn of time, I would place forwarding orders with the post office for any small businesses I was assigned (that way, I got any A/Rs). I can't tell you how many times I received credit card solicitations.

"Dear Joe's Machine Shop: Because of your excellent credit history ..."

Honesty-to-God, I also got, "Dear KPage, Trustee of Joe's Machine Shop: Because of your excellent credit history ..."

This was during the time that credit card companies were in high dudgeon about massive defaults and lobbying Congress for additional protection in the form of amendments to the Bankruptcy Code (e.g., 707(b) and the recent disgusting "reforms").

Is there any other industry that gets legislative protection for bad credit decisions? I mean *before* a so-called crisis.

Yes, a few years have gone by, but I doubt that things have changed. Credit card companies are just as predatory as ever.

And even if they aren't, I'll loathe them just the same ... just like I loathe the Atlanta Braves for dissin' my beloved Twins in the '91 Series. I choose biases with staying-power.

Posted by: KPage | September 22, 2008 12:18 PM | Report abuse

The resentment concerning obscene payouts to CEOs has often made me think that if a "minimum wage" is Constitutionally permissible, then a "maximum wage" (including options, golden parachutes and bonus income) should also be permissible. The concept flies in the face of capitalism and executive incentive - but it is used to keep worker incentive in check by establishing pay grades that have a cap. A "maximum income" of 400 times the minimum wage would still allow CEOs about $5 million a year.

I once used the concept of income limits, a "means test," in suggesting that an income cap on programs such as medicare and social security could help stabilize those systems and recommended that the eligibility cap be anyone with more income than the wages of a congressman. The idea amused a few congressmen, but didn't fly. It was a poisonous idea to triple-dippers like McCain who draws social security, military retirement and his senate wages.

Posted by: Shiloh | September 22, 2008 12:27 PM | Report abuse

Sorry for the 2.5 posts. The WaPo gerbils took their lunch break and I kept hitting Submit.

KPage,
I am really, really, really trying to wean myself off of revolving credit. For years I said that only free-wheeling living-beyond-their-means spendthrift grasshoppers like myself were holding the economy together. Seems I was mostly right.

The CC companies spent the better part of a decade greasing both sides of the aisle to make unsecured debt the hardest to discharge. I think the law of unintended consequences is coming back to bite them. I would love to see some consumer bill of rights vis-a-vis lenders come into play. Starting with telling me exactly what terms they changed rather than resending me an eight page brochure every two months with print no normal human can read and no non-lawyer can understand.

But any hopes of that happening against the combined forces of the Delaware and North Dakota bank card lobbies are pretty slim.

Posted by: yellojkt | September 22, 2008 12:33 PM | Report abuse

'The Bush administration’s position is unjustifiable. As ABC News reported:

In 2007, Wall Street’s five biggest firms — Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley — paid a record $39 billion in bonuses to themselves.

That’s $10 billion more than the $29 billion loan taxpayers are making to J.P. Morgan to save Bear Stearns.

Those 2007 bonuses were paid even though the shareholders in those firms last year collectively lost about $74 billion in stock declines — their worst year since 2002.

In short, the Bush administration wants zero punishment for these wreckless CEOs who lost shareholder money and are now costing each person in the United States $2,000. In return for $700 billion, the White House has yet to name any way that it will hold these corporations accountable or institute safeguards to ensure that this irresponsible lending and borrowing won’t happen again.

Furthermore, the White House is demanding that Congress give up its oversight powers for this deal and “place no restrictions on the administration other than requiring semiannual reports to Congress, granting the Treasury secretary unprecedented power to buy and resell mortgage debt.”'
http://thinkprogress.org/

Posted by: Boko | September 22, 2008 12:50 PM | Report abuse

yello, I'm not aware of one single realtor who is also a mortgage broker. Not one. There are about 1,500 realtors in the Southern Md Association of realtors. As far as I'm aware, the percentage who *are* mortgage brokers is approximately zero percent. Yes, they work with them, though to suggest that is "hand in glove" is wrong and vastly overstating the case by a substantial amount. A few times they do.

As to having an incentive to "up-sell," this may be theoretically true -- but no more so than in any other sales profession that operates on commission -- whether the shady "used-car" salesman of lore, or insurance sales people, the sales clerk behind the perfume counter at Lord & Taylor, or the undertaker.

You're in HVAC; do *you* up-sell your equipment and make your recommendations based upon your paycheck, or based upon what you think the client needs? I don't think you should be maligning some other profession. There are good realtors and bad, just like anything else (although from my point of view, the problem isn't "good" and "bad" based on ethics; rather it is the wide disparity in competence and experience).

In 30 years my wife has never "up-sold" a house to boost her commission. What I don't think you understand is that doing so is very often not only counter-productive, but that the realtor has much less influence on the buyer's decision than you seem to think. My wife's clients make stupid decisions all the time, all without her help, thank you.

You also seem to think up-selling is either "easy" or even doable. Most clients come in the door with a fairly narrow price range and qualification, say, $250,000 to $300,000, or whatever. Some may qualify for more, but just have a built-in limit: I don't want to spend more than $340,000. You seem to think realtors can get around these kinds of things; if so, you're dreaming.

When you have a customer in the $250,000-to-$300,000 range, let's say, there are only going to be a handful of houses that meet their specs; two-thirds of them will be disqualified automatically by all sorts of factors beyond anyone's ability to manipulate: they want a rambler, not a two-story, they want (or don't want) such and such a schjool district, etc.

By the time the realtor has gotten through all of this, the client usually has a list of maybe six houses to look at, all within a couple thousand bucks of each other. Any differential in commission is therefore illusory; it just ain't worth the realtor's time (and reputation) to try to "up-sell" under those conditions, assuming it could even be done.

A good, ethical salesperson knows from experience that it generally isn't worth it to try to manipulate a customer anywhere the customer doesn't want to go, whether it is cars, house, insurance, boats, whatever. Such deals usually blow up, at some point, and the blowback just ain't worth it.

I worked retail for five years (though on salary, not commission). I never up-sold anything or made a recommendation to a customer (which was often) that I didn't believe in, because I just didn't give a crap about the company's profits. Eff 'em. Sales people who develop reputations for honesty and candid advice succeed in the long run because of word-of-mouth, and they get repeat business.

70% of my wife's real estate business is referrals and repeat business; this is a level so high it is almost unheard of. She does virtually no advertising; she doesn't have to.

Granted not every salesperson is like this. But I don't think you should characterize the entire profession that way. (There's plenty to criticize, but that ain't it.)

Posted by: Curmudgeon | September 22, 2008 12:50 PM | Report abuse

Popping in for a minute, taking a break from the headache that is contractors. (I like scotch enough that a long time ago (back when Hector was a pup) I made the decision to not keep it in the house. Considering today's snafus, I might have to re-think that one.)

DC got her first credit card come-on at the age of 3 months. Granted, she's a savvy investor (thank goodness) with a lot of frequent flyer miles, but did they really think she could sign her name? *I* think she's gifted, but does everyone?

Shiloh, thanks for the link. I've seen Van Gogh's works with my own eyeballs enough to really appreciate his techniques with lighting (the cigarette in the skull's mouth looks like you'd get burned if you touched it). If I find myself hacking around NYC again this year, I will definitely stop by and be amazed again.

Have a happy day all.

Posted by: LostInThought | September 22, 2008 12:55 PM | Report abuse

Error in '08, indeed, yello.

The man - my friend - passed from this mortal coil one year ago.

I blogged a bit about it in the 10thcircle. Those of us who love and remember Bob/Error, please feel free to come on over and have a look.

http://www.10thcircle.com/10/?p=251

Those of you who are interested in some Boodle history are welcome as well.

Forgive my bit 'o melancholy on this beautiful fall day.

bc

Posted by: bc | September 22, 2008 12:56 PM | Report abuse

*manly hugs fer bc*

Posted by: Scottynuke | September 22, 2008 1:00 PM | Report abuse

Also, it may seem to the layman that the commission on a $300,000 house is more than on a $250,000 house, but that might not be true. The 300k might only have a 5% commission, while the 250k might be on 6%. The 250K might come with a $1,000 cash bonus to the realtor, of which the buyer is unaware (and doesn't need to know about). But the ultimate point is, the realtor won't even KNOW which house produces more commision until all the paperwork is done and things are ironed out. Yes, it is "probable" the 300K will yield a slightly higher net for the realtor, but it is by no means automatic. And the difference is only likely to be 20 bucks or something ridiculously small it isn't worth the realtor's time playing with.

Posted by: Curmudgeon | September 22, 2008 1:01 PM | Report abuse

Here is an article that makes sense and offers an original solution to the financial meltdown.

http://atimes.com/atimes/Global_Economy/JI23Dj06.html

Posted by: Brag | September 22, 2008 1:02 PM | Report abuse

bc, that was a moving tribute to Error. When I ordered my shirts I told TBG it was a great way to remember him - and that I hoped the message would not be prescient and result in an error on November 4th. But even that would simultaneously amuse and outrage the ethereal Error.

Posted by: Shiloh | September 22, 2008 1:08 PM | Report abuse

We have a very funny editorial cartoonist at www.clarionledger.com named Marshall Ramsey. His uncle is a common sense finance radio talk show host named Dave Ramsey. Marshall's cartoon today is "How to Panic a Baby Boomer." It is hilarious. I hope it will be in his USN&WR spot.

I really am starting to believe that the Mafia has higher ethical standards than the financial and housing industries.

Talk about your house of ill repute.

Posted by: Last Dude | September 22, 2008 1:12 PM | Report abuse

mudge,

The blood pressure medicine, pronto. I love Realtors. They earn every penny. I laugh at people that try to sell without one. When a FSBO sign pops up in my neighborhood I set the timer for the real sign to replace it.

I speak as a consumer of their services. When I bought my first house I was snotty-nosed yuppie that ran them ragged. I went through a half-dozen realtors that were showing me things way out of my price range, dumps they were trying to unload, places with goats and chickens in the backyard (I bought the one with the goat). They'd steer me to their exclusive listings so they wouldn't have to split MLS fees. They'd balk at showing houses in the evening because their husbands couldn't cook dinner for themselves. I got horror stories.

Then my wife talked to a couple that said the problem was they we didn't have THEM working for us. The second property they showed us met our specs and budget perfectly and hadn't been shown to us by anybody else.

Even better, when I lost by job (see earlier post) they unloaded it for me at a profit.

The second time I bought, we were older and wiser and still sent the realtor through the wringer. But she found us the perfect house.

Facts:
Realtors work on commission. Read Freakonomics on how that distorts the negotiating process.

Most homes are bought on credit and that requires the services of a mortgage broker. Any realtor that doesn't know one isn't going to sell many houses.

There are bad apples in any industry. Clearly your wife isn't one of them. Wish they were all like her.

And please take me off your Instant Umbrage List because you like misinterpreting what I say.

Posted by: yellojkt | September 22, 2008 1:18 PM | Report abuse

Thanks for the link Brag. The original Spengler's influence on historian Arnold Toynbee and the concept of cyclical history are ever present in my view of events. The use of what I assume is a pseudonym by the Spengler in Asia Times is a cynical reminder of that cyclical nature of history, characterized by RD as the "oscillating ring of eternity."

Posted by: Shiloh | September 22, 2008 1:25 PM | Report abuse

I'm sooo easily amused:

http://www.xkcd.com/

Posted by: slyness | September 22, 2008 1:28 PM | Report abuse

Thanks, bc, for remember Error Flynn. He is sorely missed on the Boodle, but it’s true that his legacy lives on here.

I’ll never forget feeling so sad over the loss of someone I’d never met in person. True friendship can exist in a virtual world.

Posted by: TBG | September 22, 2008 1:29 PM | Report abuse

Good on you, yello, for giving the boot to insta-debt. I don't think I've paid interest to a credit card company in 20 years. Have I mentioned that I hate those guys? ;-)

My mom was a realtor. She was a straight shooter, but man ... she could tell you stories about other agents that would curl your hair.

Posted by: KPage | September 22, 2008 1:33 PM | Report abuse

Two other points:

It is not true that the realtor always works for the seller, not the buyer. There is such a thing as a buyer's agent, which is a realtor who works for a buyer, not a seller. Somewhat unusual, but by no means unheard of. Further, saying that the realtor "works for the seller" may be true, but is wildly misleading in its implications.

Second, it isn't widely understood that (a) the realtor is ually (but not always) an independent contractor, who may be affiliated with a given real estate company, big or little (ReMax, Coldwell Banker, whatever), but doesn't strictly work "for" that company; and (b) that whatever the commision may be on a house, it us usually a four-way split in the "standard" and usual case, with the realtor getting only one-fourth of the total commission. So if a $300k house has a 6% commission, the realtor who sells it is getting 1.5%. (There are some variations on this, but by-and-large is is the typical arrangement). The listing agent also gets 1.5%, the listing agent's company gets 1.5%, and the buyer's agent's company gets 1.5%. Now, there are all sorts of variations on this, but just because a house sells for $300k and the commission is 6%, do NOT assume that Sally Realtor is earning $18,000; she ain't by a longshot. She's probably getting about $4,500 gross, and she may have expenses such as advertising, holding open houses, etc., to deduct, plus the usual overhead: office, car, gas, dues (up to $1,000 a year in some places), lockboxes and signage, etc. That all comes out of the $4,500.

You may be astounded to learn this (I was, when I learned it) but ReMax agents often pay about $3,000 to $3,500 a MONTH (!!) just to rent their cubbies in their RMax office (and $1,500 if the forego the office and work from home). The trade-off is the ReMax split is about 95% to the realtor, only 5% to the company. That means the ReMax agent might have to sell four or five houses averaging $300K in a year *just to break even* on office rent. (If you think ReMax is a "real estate" company in the tradional sense you'd be wrong; ReMax is a company that rents office space to independent contractors. That's how it makes its money: cubby rental. That the people in the cubbies sell houses is largely incidental.)

Posted by: Curmudgeon | September 22, 2008 1:37 PM | Report abuse

From an off-the-cuff level compare the two statements:

"A lot of Realtors aren't mortgage brokers..."

"I'm not aware of one single realtor who is also a mortgage broker."

I know that Realtors and lenders are different. I just allowed for the possibility that there was one case. Maybe there aren't. Clearly you know better.

A lot of the predatory sub-prime lending involved realtors steering to shady brokers. It happened.

Posted by: yellojkt | September 22, 2008 1:37 PM | Report abuse

Er, can the "oscillating ring of eternity" be treated with Preparation H(iggs)?

bc

Posted by: bc | September 22, 2008 1:38 PM | Report abuse

Thank you, bc, for your remembrance of Error. Like TGB, I was startled last year by the depth of my sadness on the death of someone I knew was real, but never knew as real. You described his lasting influence very well, and I look forward to wearing my shirt with pride. Error in '08.

Posted by: Ivansmom | September 22, 2008 1:45 PM | Report abuse

Money is fungible. While commission technically comes from the seller's funds, the buyer is of course "paying" for it. The real issue becomes the contractual obligations. The realtor (again, except for that rare mythical buyer's agent) is legally contracted by the seller.

I had read that about ReMax. Didn't realize the split to the realtor was that large. At $3k a month in rental space, the realtor has to be grossing more than $200k in sales a month to break even. Perhaps more.

Posted by: yellojkt | September 22, 2008 1:47 PM | Report abuse

I'm pretty sure the Nieblung would have something for that, bc...

Posted by: Scottynuke | September 22, 2008 1:48 PM | Report abuse

My hero, Tina Fey, lost her purse last night at the Emmy awards. Here's People's take on Fey's evening...

======

She may have won Emmys by the handful for 30 Rock Sunday night – and heaps of praise for her Sarah Palin impression on Saturday Night Live the weekend before – so who would have guessed that Tina Fey is a loser?

"If anyone's seen my purse," Fey, 38, announced in the Emmys pressroom backstage, "I left it under my seat."

But on to her winnings: Besides a writing Emmy for a 30 Rock episode titled "Cooter," she also picked up awards for executive producing and acting on the show.

Asked the difference between her Emmys, she told reporters, "First of all, they look identical. Alec [Baldwin, who won for acting on the show, too] was just saying to me backstage that this means I can stop apologizing for being an actor and being on the show. He wants me to promise to stop apologizing."

And the Emmy for best comedy series? "That one really belongs to everyone. So I don't like it as much."

On the topic of likes and dislikes, Fey said that when she hears the expression "President Palin," she thinks to herself, "I want to be done playing this lady Nov. 5." To the gathered journalists she added, "So, if anybody can help me be done playing this lady Nov. 5, that would be good for me."

Further pressed on what she thinks of her uncanny physical similarity to the GOP vice-presidential hopeful, Fey responded, "First of all, I was very resistant to acknowledge that there was a resemblance. Then my kid saw Sarah Palin on TV and said, 'There's Mommy.' "

http://www.people.com/people/package/article/0,,20225335_20227904,00.html?xid=rss-topheadlines

Posted by: TBG | September 22, 2008 1:51 PM | Report abuse

Error F. liked a well crafted coconut cream pie. Have a slice of your fave-pie for the fine figure of a Mr. Flynn.

Posted by: College Parkian | September 22, 2008 1:52 PM | Report abuse

Toynbee's knitting (crocheting, weaving, braiding) of the multiple threads of a civilization, social, economic, military, political, religious, etc., into the appearance of a multi strand, circular "rope" that leads to decline and collapse, always reminds my cynical side that civilizations and societies eventually hang themselves.

Posted by: Shiloh | September 22, 2008 1:53 PM | Report abuse

It may be bc but until corrected I recommend placing it on the "Torus of Tranquility."

Posted by: Boko | September 22, 2008 1:54 PM | Report abuse

It may be bc but until corrected I recommend placing it on the "Torus of Tranquility."

Posted by: Boko | September 22, 2008 1:54 PM | Report abuse

Thanks, Boko.

The helium cooling would help that a lot, I imagine. (In another moment of Possible Serendipity, I originally mistyped that as "qooling.")

And I will indeed have some pie, CP. Bob loved good steak, red wine and cigars, too. I'm very fortunate to have shared all of them with him, along with some great conversation.

If I had a convertible, I'd take it out for a spin today and smoke a cigar whilst doing so.

bc

Posted by: bc | September 22, 2008 2:07 PM | Report abuse

The efficacy of Preparation H(iggs) on the fundaments of science has yet to be fully field tested on the oscillating ring of the aperture of dark matter.

Posted by: Shiloh | September 22, 2008 2:08 PM | Report abuse

yello, you don't have horror stories about real estate; you *were* one. You were the kind of client my wife had to have a glass of white zinfindel in the evening before she could tell me about her day. Believe it or not, I mean that affectionately. (Hey, I'm a seriously *bad* customer in a clothing store. Seriously bad.)

"Freakonomics" is wrong; so are you. Hey, it happens. Most negotiations are relatively straight-forward. The agent has a vested interest in making the deal succeed, not fail by doing aything counter-productive or stupid. The realtor doesn't really care how many points are negotiated back and forth, or when settlement is, or how much closing help is needed, or the thousand other details; most do not affect the realtor's bottom line. This isn't a Donald Trump world out there in middle America.

It's like anything else: you never hear horror stories about the thousand tonsilectomies and appendectomies that go well. You hear about the three that don't, and the drunk doctor who accidentally left a sponge in.

You brag about putting your second house's realtor through "the wringer." Nice. You admit to being "a snotty-nosed yuppie" who ran half a dozen realtors crazy on your first house--and blame them. Cute. Pardon my hard-hearted lack of sympathy.

It's not personal, yello -- but you tend to make some broad generalizations about things you aren't expert in, and malign broad groups of people thereby. It's just that in my judgment you focus on the exceptions and the bad apples, without much insight or appreciation of the usual or everyday experience. It's a question of perspective. Realtors weren't the problem in the whole mortgage crises shebang. They were just the flight attendents aboard when the plane crashed.

"Exclusive" listings are illegal in Maryland. Did you report it? Why not? Did you compain to the office manager of the companies that had bad agents who gave you the run-around? Why not? Why did you have half a dozen agents in the first place? Did it occur to you that the veteran agents knew you were trouble coming in the door, and pawned you off on the rookies or the loser agents?

Realtors have to pay the MLS fee whether they have an "exclusive" listing or not; there is no fee for one specific listing. While exclusive or "pocket" listings do happen once in a blue moon, they are very rare. (Think about it: what's the point of an exclusive listing? It sure doesn't help the realtor.) And think about something else: what motive would a realtor have to show you something you weren't likely to buy?

Posted by: Curmudgeon | September 22, 2008 2:11 PM | Report abuse

Thanks to Mudge & yellojkt for teaching me much more than I realized I didn't know about realtors and the business of selling houses. Also, howdy to miamibob.

When I passed the Massachusetts bar way back when, it automatically entitled me to apply for a realtor's license without further study. I thought then and think now that was insane.

Posted by: Ivansmom | September 22, 2008 2:12 PM | Report abuse

Yello- a ringing amen on your comment:

"I do not feel bad for the plutocrats and cronies that have turned usury into national industry. I reserve a special place in he11 for the person that invented the concept of universal default on credit card terms of agreement. A forgotten payment on a closed department store card shouldn't raise the rate on my other credit cards to 29.99%. "

I now no longer want a loan of ANY sort. I've been burned on car loans, and a mortagage is insane-- a few years ago I was hearing about 40 year mortgages, even 50-year mortgages being offered.

Now, on a 30-year mortage even at reasonably low interest, you can wind up paying 150% the house's original value, and the first few years you're basically paying the interest only, nothing on the principal.

Usury is a gross understatement.


Posted by: Wilbrod | September 22, 2008 2:24 PM | Report abuse

The comments on realty agents caused me to review the fifteen or so real estates transactions (including 6 primary residences) of my life and to my amazement I used a real estate agent only once in 40 years, never used an attorney, relied on title companies as closing agents, always read and edited the fine print to my satisfaction and, so far, "lost" money on only one deal, a mortgage I hold on a church property that is now worthless because of prior judgments on other debt. I expect the two pastors to get their default penalty at the last judgment.

Posted by: Shiloh | September 22, 2008 2:34 PM | Report abuse

Alas, I have no pi, wine, nor seegars with which to honour our friend Error Flynn. I do have, however, a goodly selection of Jethro Tull and Francis Zappa to help remember him.

Posted by: The Central Scutinizer | September 22, 2008 2:38 PM | Report abuse

Hi C.Scrut.

If this copy/paste works, this would be your pi(e):


Posted by: College Parkian | September 22, 2008 2:51 PM | Report abuse

Wow, I wonder how big a mortgage I'd have to pay to get a dog house?

Guess a spare bed, crashing on the sofa, or sacking out on my own dogbed is worth not being a millionaire in bankruptcy.

The gnome says that 4-5 person families may live in India in apartments around as big as an extra-large handicapped bathroom in America. But no air conditioning or dogs to enjoy it.

The news says that tent cities are rising around Reno and other cities people went looking for jobs in. The pictures looked too familiar, the gnome says.

Time for us to go walk outside while it's still free.

Posted by: Wilbrodog | September 22, 2008 2:55 PM | Report abuse

I've had very limited real estate experience but most of the real estate agent part was negative. Home ownership is great and as long as my mortgage company doesn't go bankrupt I am happy with my fifteen year mortgage and low monthly payments (considerably less than rent).

When we started looking for a house to buy, it so happened we were renting a house that was owned by two real estate agents, a husband and wife. The husband was a nice guy and the wife...well, the husband was a nice guy. We thought that we would increase the chances of getting our security deposit back on the rental if we hired the husband as our buyer's agent, so he would help us buy a house and he would get a commission. First thing he did after we signed the agreement with him was to delegate all future transactions to the wife. She helped us look at houses -- she had the combination to the locks. But she never found a house for us to look at. We drove the neighborhoods writing down addresses and I researched on the internet, byowner.com and realtor.com and homefinders.com. The agent tried to SELL us EVERY SINGLE HOUSE that we looked at. This is our "buyer's agent!" We finally found a house that was perfect for us. She had a mortgage broker and insurance companies that she was working with and we used them because they were reasonable and it was easier than arguing with her. She got a substantial commission in spite of having been very little help and a lot of irritation. And they STILL tried to keep our security deposit (we had to send them a letter from our lawyer to pry it out of them.)

For a funny story about on how not to choose a real estate agent, see Jonathan Franzen, /i/The Discomfort Zone/i/. (chapter 1)

Posted by: kbertocci | September 22, 2008 2:57 PM | Report abuse

RE: Mudge's 12:50PM - Am giving personal testimony here that my Lord & Taylor Clarins Cosemetic Counter Lady, Nasrin, is no shyster. In fact, over the years I have counted her as a friend as her mission in life seems to be to prevent the onslaught of wrinkles to my almost 70 yr. old skin.

Realizing that Mudge meant no slur on those who labor to make anybody and everybody as lovely as they can (I know you said perfume, but thought I would really lay it on thick, here) I wanted to take this opportunity to salute the efforts of a French company/lady to beautify America. *waving flags of USA/France*

Now I will take myself to bc's blog because I have heard you all speak about your friend, but wasn't around when he was with you.

Posted by: VintageLady | September 22, 2008 3:01 PM | Report abuse

VintageLady, for more on Error Flynn, see my tribute from a year ago:

http://voices.washingtonpost.com/achenblog/2007/09/error_flynn.html

And Error in his own words:

http://voices.washingtonpost.com/achenblog/2006/07/error_flynn_plan_for_error.html

bc

Posted by: bc | September 22, 2008 3:08 PM | Report abuse

After reading bc's blog and the comments the thought came into my head of Error and then immediately Nani - then I felt the pang of tears in my eyes - miss them both.

Posted by: dmd | September 22, 2008 3:10 PM | Report abuse

With all due obeisance to Error, we do have Frosti in '08!! Who knows, maybe in a few years, we might be her grassroots supporters for the big show.

=============================

Shiloh owns a church? Who knew? Is there, like, a discount for you when they pass the plate?

==============================

Ivansmom should have her own: attorney's office, real estate brokerage, and chinese laundry, all from the same storefront. She's got that multi-tasking thing down cold.

================================

Lost homes. Been there, done that. Bought a modest middle class house in Louisiana 25 years ago, dutifuly paid my note and taxes, etc. Lost my job, found one up here. But the economy was in the tank then as well. On my block there were 22 houses. 18 of them were for sale.

Did anybody bail ol' Don out then? Noooo

PPppffffttttt

Posted by: Don from I-270 | September 22, 2008 3:14 PM | Report abuse

CS, I saw Jethro Tull in concert (for the first time) about a week after Error had passed away. It was very bittersweet for me, because I had been looking forward to sharing the experience with him. (Short review - Ian Anderson doesn't have much of a voice anymore, but it was a great show. Highlights - Fat Man and Locomotive Breath. I was sitting between 2 guys who had seen Tull in the 60s, and they assured me the sound production was way better now.) So your idea is quite appropriate - crank it up!

Posted by: mostlylurking | September 22, 2008 3:14 PM | Report abuse

Wilbrod, I am afraid your umbrage is going to the wrong place. You need to blame Johann Carl Friedrich Gauss, not usurious lenders. It's a fundamental property of the calculation of compound interest on a decreasing principal that your early payments apply almost entirely to interest, not principal. This is true whether your interest rate is high or it is low. I knew the math at one time, but it's been a while. I can send you my code for comparing all manner of different loans -- I wrote it while comparing loans for my first house purchase, back in 1990. It is also true that at most ordinary rates of interest, the lifetime cost of a mortgage is significantly greater than the principal -- I remember in high school, for some typical interest rate (I don't remember the value), we worked it out to be something like a factor of three. Why do you think mortgage lenders are in business? To make money. If a lender extends a 30-year mortgage to you, and lifetime value is 3 times the value of your principal, that still means it will take 10 years before the lender hits break-even, pretending that there is no inflation. With the influence of inflation at work, he probably has to wait more like 0.5 to 0.67 of the life of the loan (15-20 years) before he starts to see any profit. This is not usury, this is the cost of money -- you need money now, and you don't have it. These guys are in business to provide you with a way to live off money that you do not yet have. If they didn't make a profit, there would be no point in doing business, and we would only be able to live out from under the eyes of our parents when they die -- leaving us with our own children as permanent boarders. So long as it's cleanly and effectively regulated, I like mortgages just fine, thank you.

Posted by: ScienceTim | September 22, 2008 3:17 PM | Report abuse

mudge,
I highly recommend realtors. I wouldn't buy or sell a house without one. They earn every penny and then some. I admit a fair amount of ignorance about how the details of the industry work. I've never even seen Glengarry Glen Ross. I may not know how to make the sausage, but I can read the ingredients.

The first house we bought was in Florida in the late 80s. There were a lot of part-timers and near amateurs in Florida selling real estate at that time. We would see a house we liked. Call the Realtor on the sign, see the house, not like it, they would say they had others. We'd look at them. They'd be awful. Repeat.

The worst house we saw was a rancher with a 70s orange ski chalet fireplace in the middle of the living/dining room. In Florida.

Within two houses we could tell whether the agent "got it" or not. Some were incompetent. Others were just personality clashes.

My wife and I were both working and could only look evenings and weekends, so the two housewife agents that had to be home every night didn't work.

The worst agent was my old Scout leader. He showed us dumps. Refused to work in our price range. Then he got really p1ssed when we went to another realtor.

The couple that finally made the sale was a folksy retired serviceman (think Morgan Freeman in his prime) and his wife. A great working couple. She did the showing and he did the business end. They were like a dream come true.

In Maryland, my boss steered us to a realtor friend who found us a rental in Columbia and then we went with her when we were ready to buy. Lots of townhouses in Hoco, but our list was a little fussy.

One-car garage
Walk-out basement
Large MBR w/ walk-in closet
Specific neighborhood requirements

The toughest factor was the bedroom window test. I'd open it. If I heard traffic, we left. Townhouses seem to come with highways.

This realtor was patient and professional and I only wish I needed to buy a house from her more often.

I couldn't do what a realtor does. Which includes putting up with me.

Posted by: yellojkt | September 22, 2008 3:19 PM | Report abuse

Yello-Umbrage Alert! It is SOUTH Dakota and Delaware, not North Dakota with the usury encouraging laws. I'd let it pass, but must rise to defend my beloved ND-still the only state to have a state owned bank. Which by the way offers student loans to ND residents attending a ND school at a fixed rate of 7.24% or the current variable rate of 4.31%.

Posted by: frostbitten | September 22, 2008 3:22 PM | Report abuse

LiT, funny about DC's babyhood credit card offer. A few years ago, my then-roommate listed her phone number in my cat's name (she wanted to be unlisted but didn't want to pay for it). The cat then started receiving mail. Credit card offers, yes. Also, a great deal on a brand new car! Sneaky cat, learning how to drive without telling me about it.

Posted by: bia | September 22, 2008 3:22 PM | Report abuse

It's hard to believe it's been a year already.

I think of Error every time I'm working on a little door (which is kind of strange as I never met him, but fitting in a cosmic sort of way).

And now that I'm fighting chipmunks, the cosmic karmacity is almost uncanny.

Posted by: martooni | September 22, 2008 3:23 PM | Report abuse

I swear I am not talking about your Mom, sister, great aunt Ethel, or person.

But, is there not a pattern to this.

The voices in my head keep pointing out that it's this: 6 percent hedge fund fee; 6 percent money laundering fee; and 6 percent realtor's fee.

Six. Six. Six.

666

The Mark of the Beast.

Everywhere. Sprouting in every front yard.

It's like the Amityville Real Estate Company.

Just when you thought it was safe to put down a down payment.

We need an exorcist. Can Obama do the dogma?

I'm talking Linda Blair, head spinning around, Wall Street depossession.

But, seriously, the whole system is broken. We don't need credit. We don't need loans.

We need paid off houses and paid off cars, not paid off regulators.

Posted by: Last Dude | September 22, 2008 3:23 PM | Report abuse

TBTB

Posted by: omni | September 22, 2008 3:24 PM | Report abuse

I think we all do, dmd.

No tears have rolled down my cheeks and nose yet, but all bets are off tonight after a couple of glasses of wine and kicking back on my deck before MNF (Error liked football too, and contributed something to the 10thcircle, right towards the very end...)

http://www.10thcircle.com/10/?p=197

bc

Posted by: bc | September 22, 2008 3:27 PM | Report abuse

I second everything MoneyLenderTim said. Compound interest is a double edged sword, but a necessary evil. The truly evil part is that the banks have turned themselves into a nationwide company store. Once they own your soul, they never give it back. If they just lent money at a fair rate, that would be fine. But there are endless fees and come-ons and phony insurance plans. Everything they try to sell you is a scam.

Posted by: yellojkt | September 22, 2008 3:28 PM | Report abuse

Hey, considering the bailout price tag, Metro's a real bargain!

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/22/AR2008092201144.html?hpid=topnews

*rolling mah beady 'lil eyes*

Posted by: Scottynuke | September 22, 2008 3:29 PM | Report abuse

SciTim, I was seeing 40 year mortgages at 15-25 year mortgage interest rates.

As you point out, the risk is considerable. This is exactly why anybody who is doing an 40 year mortagage to help somebody with poor credit buy into an overinflated market is literally handing a drug addict drugs and a rope to hang themselves with.

In other words, I regarded the rise of such mortagages as a danger sign. And so should anybody.

30-year mortagages are, as yellojkt points out, enough of a risk for both lender and recipient, even with fixed rates as property values/taxes can fluctate and the income may decline (with retirement) before the mortagage is paid off. 40 year mortagages by themselves far exceed 1.37 times the financial risk of a 30 year mortagage.


Posted by: Wilbrod | September 22, 2008 3:31 PM | Report abuse

fb,
I stand corrected. There are those that say North Dakota doesn't even exist.

http://www.cs.indiana.edu/~kinzler/nodak.html

Not that I'm one of them, but I'll have to see it before I believe it.

Posted by: yellojkt | September 22, 2008 3:34 PM | Report abuse

Don, the worthless paper mortgage I hold is on the parsonage, not the church - both of which have judgment liens against them that far exceed the property values. The husband/wife pastors abandoned the parsonage and now live in a mobile home behind the church and the historic parsonage is deteriorating by the day. The remaining values is in the small parcel of land and that is not worth enough for the primary lien holders to act on. As for the collection plate, I am reminded of the Mark Twain story about a visiting missionary. Expecting a second collection, Twain said in advance he would add a dime to the plate. But the missionary went on, and on, and on, and Twain said that when the collection plate finally came to him, he took a dollar out.

Posted by: Shiloh | September 22, 2008 3:36 PM | Report abuse

Price of oil jumps from $105 to $121 today, all due to the perceived weakness of the US$. Things are so interwoven now it's scary. For example no sub-primed mortgage was sold in Canada yet our Asset Backed Commercial Papers market (a very large amount of short term commercial loans) crashed because quite a bit of the "assets" backing the papers were those securitized mortgages. They were cheap assets but it turned out offered very poor backing...
Merrill-Lynch accepted as low as 22 cents on the dollar for their securitized mortgage and the shareholders were rewarded by losing only half of the value of their shares when BoA bought them. Lehman refused sales at 50-60 cents and saw their share value reduced to a big fat O. Mind you the big shots at Lehman USA extracted a nice 2.5 billion in bonus/guaranteed contracts help liquidate the assets (Unfrikkingbelievable!) so at least the millionaires haven't lost everything, unlike the regular employees and the shareholders.
Now the US gunmint wants to guarantee 100% to the remaining holders of those assets? Come on. At 40-60 cents on the dollar there will be takers.

Posted by: shrieking denizen | September 22, 2008 3:36 PM | Report abuse

I think that the market in general, and oil prices in particular, have become dangerously disconnected to reality. The markets have become nothing more than a polygraph test hooked to the collective arm of a bunch of easily-spooked investors. It's absurd.

Posted by: RD Padouk | September 22, 2008 3:40 PM | Report abuse

Andy Borowitz applies for federal assistance:

http://www.newyorker.com/humor/2008/09/29/080929sh_shouts_borowitz?printable=true

Posted by: kbertocci | September 22, 2008 3:57 PM | Report abuse

I could never be a realtor, either, yello. One needs a lot of people skills, and I...um...tend not to have too many (mainly, I hate working with morons or people I otherwise don't respect).

The guys in Glengarry Glen Ross weren't realtors; they were paid salesman (though on commission) which is a major difference; they could be hired and fired. Reegular realtors are not "hired" per se; they simply join an office where their license is kept or "hung" (in the vernacular, one hangs one's license at so-and-so's office). Remember, they are basically all independent contractors. They are almost never "fired" but once in a blue moon one does something so egregiously wrong, one way or another, that they are asked to leave.

It is not unusual for a medium-sized real estate office to have, say, 100 agents, in theory. Of these, perhaps 25 or 30 are "full-time" agents who conscientously work the business every day (and weekends). The other 70 or 80 agents may be parttimers, etc., who may only sell one or two houses a year. Since they incur no costs and have almost no overhead, RE companies keep them on because they don't "cost" anything, and if they happen to sell a house once ayear, well, 1.5% of that deal is still better than zero percent of zero.

Parttimers can be otherwise good, intelligent people -- schoolteachers, policement, whatever -- but they suffer from two major problems: very restricted availability, and they are so often out of the loop they don't attend weekly meetings to see what's going on, don't go on broker tours, don't keep up with rates and changes, etc. The parttimer may be a wonderful schoolteacher, and mazel tov to him or her-- but...um... you kinda get what you pay for: someone who is just trying to earn a few bucks on the side. (Think of Harrison Ford's character in "Hollywood Homicide," trying to show houses during a murder investigation; also think of Det. Harry Bosch's partner in some of the great Michael Connolly novels. Also, try hard -- very very hard -- NOT to think of Julianna Margulies selling one of Tony Soprano's storefronts, and good luck with that image, if you saw the episodes.)

It's like most anything else: would you want a parttime dentist, or a parttime lawyer working on your case? Even a parttime account who did your taxes once a year (assuming your taxes were more complicated than could be handled by the average parttime H&R Block person).

Generally speaking, you'd want a fulltime professional who stayed current on the intracacies in their field. And you'd want one you liked and trusted and worked well with, as a rule, same things you'd want in a dentist, doctor, lawyer, plumber, electrician, HVAC guy, whatever. The trick is to find any one of those people, and then sticking with them. You have to "shop" for them, just as you'd shop for a dentist or a lawyer or whatever. Referrals and word-of-mouth work best. Advertising is meaningless, and just walking into a real estate office and getting assigned to whoever happens to be on duty that day is exactly the same as walking into the health clinic or emergency room and getting whoever's on duty that night -- it's pot luck. Sometime s pot lucjk is just fine if all you're getting is a flu shot or a couple stitches. If you want a longer-term relationship, then that's different.

Posted by: Curmudgeon | September 22, 2008 3:59 PM | Report abuse

Did I mention the coming hyperinflation and the resulting similarity of our currency to banana republic tissue paper? We only get to play the game where we make all our dollar denominated securities worthless once. We better make the best of it.

Posted by: yellojkt | September 22, 2008 4:01 PM | Report abuse

Wilbrod... Homeowners are also taking advantage of our very own government bailout when we deduct the interest we pay on our mortages.

So even though we're not chipping away at the principal very quickly, the more principal we pay (and therefore the less interest), the less we get to deduct.

So homeowners are perfectly happy to keep that interest-to-principal ratio high for the first few years.

Posted by: TBG | September 22, 2008 4:01 PM | Report abuse

I thought it was pretty funny when some of the Dems who were getting raked over the coals a while ago for getting low interest rates on their mortgages were every bit as clueless about them as I am about mine.

I've been paying extra on my mortgage so that I can get it paid off by the time I retire. I'm hoping that it doesn't all go poof - I will be really ticked off.

I never understood the refinancing craze - I figured if the financers were so eager to do it, they must be making out better than I would be. I remember when we bought our first house, we had to put 25% down. Some of this mess was brought about with good intentions, to allow people to buy houses without having a lot of money saved up. Once again the saying about good intentions is proved true...

Posted by: mostlylurking | September 22, 2008 4:02 PM | Report abuse

I want a T-shirt that says "Happy Bottom Riding Club" on it.

Posted by: Jumper | September 22, 2008 4:10 PM | Report abuse

mudge,
Wise words. My mistake with my first house-hunting experience was thinking that finding the right house was the hard part. Finding the right person to find me the house was far more important.

Posted by: yellojkt | September 22, 2008 4:11 PM | Report abuse

I'm going to again wander into territory where my ignorance will shine like Hatteras Light. I've been told that even among realtors, there are listers and there are showers and they each bring different skills to the table.

To take mudge's medical professional metaphor a little further, I'd rather have the eager go-getter building a practice rather than the guy with a patient waiting list where it takes you 6 weeks just to get an appointment and then shoves you out the door after a five minute exam.

Some bedside manner is needed. And not the kind that Annette Benning had in 'American Beauty'. Not that I wouldn't want Ms Benning as my realtor.

Posted by: yellojkt | September 22, 2008 4:21 PM | Report abuse

Thanks, bc. I have read all of the links that you provided. I am sincerely sorry for your loss.

I can relate to Error's love of his Porsche, we had a '79 red 924 for years, when we finally sold it, a young couple bought it and happily drove away in it. That made us feel pretty good about letting it go.

When we sold our '88 red 560 DL about a year ago, another young couple drove it happily away.

Now, we have a blue Prius :-0, a terrific seniors' car.

Posted by: VintageLady | September 22, 2008 4:22 PM | Report abuse

What we are seeing is the fruit of a systematic effort to remove all competence from the U.S. government. Like fanatics from the fringes of the middle east, the neo-cons have succeeded in destroying this country. Why a people have voted for their own destruction is inexplicable.

Posted by: Anonymous | September 22, 2008 4:28 PM | Report abuse

"Realtors" is a trade protected term. State licensed non-members of the trade association are simply realty or real-estate agents. I like the English term "estate agents" because it connotes end of life sale of property.

Posted by: Shiloh | September 22, 2008 4:30 PM | Report abuse

WaPo headline this afternoon: Japan's Ruling Party Picks Brash Aso as PM. Given the current polls, it looks like we got a 50-50 chance of gett'n one o' them, too!!

Posted by: Don from I-270 | September 22, 2008 4:31 PM | Report abuse

I refinanced twice. Once from 7.0 to 6.25 and then to 5.875. Each was no-closing cost with some modest cash out and a lower payment. It was all the rage in my office for about a year. One guy refinanced four times. There are enough crumbs flaking off to pay the broker and make money for the new finance company as long as rates keep going down.

Posted by: yellojkt | September 22, 2008 4:37 PM | Report abuse

Regarding your article appearing in this morning's WP Online: "A Sense of
Resentment Amid the 'For Sale' Signs"

For me "resentment" doesn't define the situation properly -- Disgust does,
maybe, but absolute condemnation, disappointment, bitterness and
frustration in Congress says it better.

Simply stated, the American people have been betrayed by the selfish,
greedy political hacks who sit on Capital Hill yelling and pointing legal
fingers at one another, preening for the cameras with their cronies at
their side, and getting nothing at all accomplished -- that's where the
real problem is. Blaming the Wall Street power brokers is one thing, but
the media needs to take a long hard look at America's political power
structure. With the exception of the politicians, an entire country has
been stripped and hijacked of the ability to control its own destiny. And
that, my friend, is the real story.

I'm mad as hell! The American people are mad as hell! Congress has let our
country down...and we have no where to turn.

Vote all the bums out. Get new bums!

Posted by: Joe H | September 22, 2008 4:38 PM | Report abuse

VintageLady,
At the beach the other day, I'd been talking with another guy, a surfer about global warming of all things. His big circa-1980 Jeep Wagoneer was opposite mine. I yelled over to him about his classic vehicle. He explained that he'd gone to an estate sale. There was the beautifully cared-for vehicle in the garage.

I've reached an age where I'm aware of having a handful of things that might make the estate-sale folks happy.

Posted by: Dave of the Coonties | September 22, 2008 4:46 PM | Report abuse

Shiloh's right about Realtors®. That's why it is randomly capitalized in my posts today. I was going to add the ®, but I figured that was just a little too cute.

Interestingly, AIA is trademarked by the American Institute of Architects, but PE is public domain. But highly regulated. I wince when I hear people call themselves a software, sanitation, or domestic engineer. Those are disciplines that don't have a NCEES exam. Yet.

Posted by: yellojkt | September 22, 2008 4:49 PM | Report abuse

VintageLady,
At the beach the other day, I'd been talking with another guy, a surfer about global warming of all things. His big circa-1980 Jeep Wagoneer was opposite mine. I yelled over to him about his classic vehicle. He explained that he'd gone to an estate sale. There was the beautifully cared-for vehicle in the garage.

I've reached an age where I'm aware that there's little use in buying stuff that will outlast me, unless perhaps it's good enough for someone else to keep.

Posted by: Dave of the Coonties | September 22, 2008 4:49 PM | Report abuse

God loves us so much more than we can imagine through Him that died for all, Jesus Christ.

Howdy, friends. I'm borrowing your words, Ivansmom. Just got back in. I went to the doctor with my daughter to take the g-girl for her physical and to get her latest shots. Boy, did she holler and scream up something awful. Poor thing got five shots, maybe more.

How are you, Mudge? I read your rant(eleven am), I thank you for the lesson, and I agree with you totally. It's about all of us, not just some.

And bc, thanks for the memories of Error. I remember when I found out about Error's death. I went to Monroe to meet Slyness, to get the computer that RD, with his sweet self sent, and she told me the news and it shocked me. When she told me, I wanted to start screaming right there, but I didn't want Slyness to think I was a total nut. I drove back down 74 in a state of shock. I could not believe that Error was gone. I couldn't believe how sad I was about his death. I never met Error, never, yet his death knocked the wind out of me. It did. It was like I lost a family member. And when I think about him now, it brings tears to my eyes. Error spoke his mind, and he didn't back down from anything. I truly miss him.

I'm worried about my daughter. She's having health problems. Pray for us, please.

It is hot here, but so sunny and bright. The perfect fall day. And I've been out in it most of the day.

Can anyone tell me where I can get an application for a bail out too? Is it the Treasury Department?

Slyness, Martooni, Scotty, what's up, folks? And a big hello to all.*waving*

Enjoy your evening, folks.

Posted by: cassandra s | September 22, 2008 4:50 PM | Report abuse

Joe H, I have to disagree with you. You say that the problem is Congress "getting nothing at all accomplished". On the contrary, the problem is that they DID get something accomplished -- they dismantled, disabled, and hobbled the regulatory system. They were able to do this because they combined bare majorities in Congress with a President of the same party as the Congressional leadership of both houses, making every majority a veto-proof majority, because the President vetoed nothing from his own party. Want an earmark? No problem! Want to take away regulatory power from the SEC? Sure, why the heck not? Want to confirm incompetent political appointees? I don't see why not.

One thing we can take comfort in, for the next election -- regardless of which way we go with the Presidency, I expect that Congressional majorities will turn more Democratic. That means divided government, which means that things get done ONLY if they have support that crosses party lines. I would RATHER see an Obama presidency, but that raises the concern of one-party government. I happen to think he is the best choice, and I think we could do with some one-party rule by the Democrats as a backlash against the Republican one-party state that prevailed for most of the preceding administration. However, I wouldn't like to make a habit of it. It invites abuse.

Posted by: PlainTim | September 22, 2008 4:52 PM | Report abuse

"Anger," Joe H, says it in a word. But we'll get over it. Welcome to the saner vent.

Posted by: Shiloh | September 22, 2008 4:55 PM | Report abuse

Yes, "realtor" is a trademarked/registered term. So what? As an editor, I run across trademark symbols all the time. I put them in the trash, where they belong. No one is under any obligation to use them. I'll use one when Copy Editor® gets trademarked. Right after Pre-Owned Vehicle Negotiation Specialist®.

Posted by: Curmudgeon | September 22, 2008 4:57 PM | Report abuse

I fear a single party dual chamber majority with a filibuster-proof majority in the Senate and the same party holding the White House. I fear two more conservative Supreme Court justices more.

Posted by: yellojkt | September 22, 2008 4:57 PM | Report abuse

Dave, one of my sons now has my blue '86 volvo wagon, straight shift, 30 mpg. He loves it, it is shabby looking, and the a/c no longer works, but he uses it to haul his kayak and all manner of gear. FFX Co. sez it's worthless, PPTaxwise. The thing is, we keep our cars a long time, and try to maintain them. The Prius is the first new car we have had since the volvo wagon.

Posted by: VintageLady | September 22, 2008 5:00 PM | Report abuse

While eating my cheerios, my windows PC crashed and gave me a headache that took three tylenol to cure. I had to google the directions and then xerox all the warranty paperwork.

Just trying to upset the intellectual property lawyers lurking.

Posted by: yellojkt | September 22, 2008 5:03 PM | Report abuse

Bob Reich suggests some conditions for the bailout.
http://robertreich.blogspot.com/


Thanks for the pi(e) CP
*giggle*

Posted by: Boko999 | September 22, 2008 5:05 PM | Report abuse

I see in Tim's subtle message the rationale I've used in the past few months - doubling down on my monthly campaign contributions by including the DSCC as a hedge against the vagaries of the electorate.

Posted by: Shiloh | September 22, 2008 5:08 PM | Report abuse

yello... I imagine you reached for the kleenex, too, didn't you?

Posted by: TBG | September 22, 2008 5:32 PM | Report abuse

Don... that "Brash Aso" remark goes down as one of the Best of the Boodle, if you ask me.

Posted by: TBG | September 22, 2008 5:35 PM | Report abuse

TBG, the check (actually a M.O.) is in the mail. Ship after receipt. And thank you, again. -SG

Posted by: Shiloh | September 22, 2008 5:39 PM | Report abuse

Just for the record, Moreno isn't doing a Kirby ... more like a Ditko.

Posted by: KPage | September 22, 2008 5:41 PM | Report abuse

Awwww, yello -- I hate it when that happens. And, since I appear to be the Boodle's intellectual property atty, here's the scoop: I suggest that in the future, you use the term "photocopy" instead of "xerox" so that Xerox doesn't get mad. Several decades ago (not sure my math is right), Xerox spent bazillions of $$$ on an ad campaign to make sure that people not use "xerox" if they actually weren't using a Xerox to, you know, "xerox" -- if the mark is used in that way on a continual basis, it becomes generic and loses its value. That's what happened to "cellophane" and "escalator" -- and Xerox didn't want that happening to its valuable trademark.

That's your lesson for today. Quiznos tomorrow.

Hey, TBG, I just emailed you a wonderful article which somebody sent to me. I'd like to have posted it here, but it has some wirty dirds in it (vernacularly speaking), so I thought better of it. It's very, very good, though, and I knowingly sent it to some Republicans I know (there aren't very many of them (I mean, hardly *any*)). It's really terrific.

Gotta go.

Posted by: firsttimeblogger | September 22, 2008 5:54 PM | Report abuse

The autumnal equinox will always remind me of EF. We used to email quite a bit towards the end. We would reminisce about old television shows, and, predictably, do a bit of venting. He was also intrigued by my job, so I shared as much as I could, although I feared the boredom might accelerate his condition.

In a few weeks my wife and I are celebrating our twentieth wedding anniversary. EF was going to give us a tour of the city. Sigh. But I guarantee we will lift a glass of champagne in his honor.

Posted by: RD Padouk | September 22, 2008 5:55 PM | Report abuse

Congrats, RD, on your anniversary.

I keep forgetting to ask the host and hostess of the MBPH (i.e., Mudge and TBG) about the dress for that event (other than "yes"). I am assuming that whatever I can force my body into will be suitable (and there's not much from which to choose, I might add), but I will be mindful of looking spectacular. Sorta.

Posted by: firsttimeblogger | September 22, 2008 6:02 PM | Report abuse

Congrats, RD, on your anniversary.

I keep forgetting to ask the host and hostess of the MBPH (i.e., Mudge and TBG) about the dress for that event (other than "yes"). I am assuming that whatever I can force my body into will be suitable (and there's not much from which to choose, I might add), but I will be mindful of looking spectacular. Sorta.

Posted by: firsttimeblogger | September 22, 2008 6:03 PM | Report abuse

sorry about that -- my computer (or, more fitting, WaPo) got the hiccups. And might again.

Posted by: firsttimeblogger | September 22, 2008 6:04 PM | Report abuse

RD,
Welcome to the two-decade club. It's a close cousin of the half-my-life club and the as-long-as-I-can-remember club.

Posted by: yellojkt | September 22, 2008 6:08 PM | Report abuse

Happy Anniversary, Mr. and Mrs. RD. Ours is this week, however, I'll be pulling bus duty for the band.

Posted by: jack | September 22, 2008 6:13 PM | Report abuse

Keep in mind that Buffalo Billiards is a pool hall. That should help in determining your dress for the evening.

I think some folks will be wearing their Mega BPH t-shirts and some will be wearing gladiator wear.

Posted by: TBG | September 22, 2008 6:17 PM | Report abuse

Early happy anniversary to the RDs and the Jacks! Hold your lovers tight, and try to laugh a lot, each and every day.

RD, I saw the nice little note on a previous kit/boodle, I'm sure your Mama and I would get along, just fine....

Posted by: VintageLady | September 22, 2008 6:23 PM | Report abuse

New Kit! (and, a bit of copyright infringement if permission to republish weren't obtained -- need a lawyer, JA?).

Posted by: firsttimeblogger | September 22, 2008 6:25 PM | Report abuse

Vagrancy of the electorate?

Is it that bad down there already?

Posted by: Boko | September 22, 2008 6:28 PM | Report abuse

The variety of mentor relationships has had no bounds, except perhaps that boundary between the living and the dead. And that, in the fullness of life on both sides of that boundary, erases the lines between the virtual and the real, the actual and the ethereal. Error lives on in all of those who knew him. That is the community and continuity that we all experience in our personal losses; that is the deep mentor of our own days. -Anonymous by choice

Posted by: Anonymous | September 22, 2008 6:37 PM | Report abuse

Ya gonna trash me, Mudge?

Posted by: Wilbrod the Gnome® | September 22, 2008 6:56 PM | Report abuse

Yes, TBG, I know that all too well whenever I see the "mortagage deduction" that I must skip over, thinking renting costs money too and is making SOMEBODY a profit.

It makes me feel like I'm subsidizing other people's 40-year mortagages when they make more than I do.

Minnesota, though, has a law giving renters a tax rebate that comes out of the tax paid on that property. That does take the sting out now.

Posted by: Wilbrod | September 22, 2008 7:00 PM | Report abuse

New kit!

Posted by: slyness | September 22, 2008 7:17 PM | Report abuse

What would the economy look like if we all lived within our means? Hmmm...

Anyway.

This morning on my way to work I heard Linda Wertheimer's interview w/ Chris Dodd. At one point, he said the country is lucky to have Paulson in charge, as he is so smart and qualified.

What is it with this craze for calling ourselves "lucky" and "blessed" about everything? Should the selection of a public servant be a lucky or prayer-inspired choice, or a cold-headed analysis of the qualifications of all possible choices?

I understand how people feel blessed when they have healthy children, or when they come unscathed from an accident or disaster. Winning the lottery is lucky. But having a qualified guy in charge? Isn't that the basic expectation???

I guess we will be lucky if next year Sarah Pain doesn't have a blessed thing to say about who fills cabinet posts.

Posted by: a bea c | September 22, 2008 7:41 PM | Report abuse

I won't t®ash you, Wilb®od, though I may ask to see if you can twi®l your past®ies.

Posted by: Cu®mudgeon | September 22, 2008 7:43 PM | Report abuse

Aw shoot. I gave Error Flynn his name, sort of. Darnit.

Posted by: Bayou Self | September 22, 2008 10:20 PM | Report abuse

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