Posted on 12/31/2008 6:13:38 PM PST by TigerLikesRooster
Only full disclosure of toxic debts will get the West moving again It has been a year of financial explosions.
By Liam Halligan
Last Updated: 5:44AM GMT 29 Dec 2008
Comments 24 | Comment on this article
The commercial pillars holding up the Western world - banking prudence and sound credit - have been smashed to smithereens
The "advanced" nations are now flirting with economic collapse. The emerging economies have also suffered "collateral damage" – the West's "sub-prime" debt bombs now threatening the stability of global commerce.
The developed world is on course to contract by 1.1pc during 2009. That will hurt. The emerging markets are also set to slow – their growth falling to 3.1pc – as China and India feel the impact of lower Western demand.
But 2010 could be even worse – unless policymakers can piece the global economy back together. And the prevailing policy response –soft bail-outs, ultra-low interest rates and unfettered government spending – not only won't work, but will compound this crisis.
So how should Western governments respond? How can we escape this credit crunch, and prevent it being repeated?
As the Bank of England Governor Mervyn King said last month, "getting the banks lending normally again . . . is more important than anything else". After piling into risky assets for years, the Western banks now refuse to lend to millions of credit-worthy firms and households. That's jammed the wheels of finance, making fears of recession self-fulfilling.
(Excerpt) Read more at telegraph.co.uk ...
Ping!
Tiger...
Maybe just starting with hanging some CEO from a failed bank and an aggressive caning of the entire credit approval department would make me feel better.
pointsal
Social Security is a much worse scam than Madoff. Madoff was only in the billions. SS is in the trillions of $$.
Obviously true. Transparency is the only solution. Good luck getting it. We can’t even get transparency out of the US Treasury Secretary’s outflow of tax payer moneys. If he won’t tell us anything, the insolvent banks are sure as hell not going to fess up.
There is no easy exit or shortcut, and the sooner our IvyLeague einsteins face this grim reality the sooner we may have a shot at recovery.
The housing boom in FL turned while the construction was in progress and most of the purchasers backed out, forfeiting their $30k deposit.
The project sold very slowly through 2007 with 47 of the 90 units selling. The developer held the remaining units and ultimately leased most of them out at monthly rents that cover, at most, 2/3rd of carrying costs.
One unit which illustrates the larger problem perfectly was sold and closed in February of 2007, and fell into foreclosure in early 2008. It was auctioned by court order in October 2008, and did not sell (i.e. it was "knocked back" to the bank and became an REO property).
At the time of purchase in 2007 the buyer borrowed the entire $650,000 purchase price (i.e., zero down). After foreclosure and assumption by the bank it has been listed with a Realtor at an asking price of $437,000. Depending on the ultimate selling price and the time on the market, the original mortgage lender will salvage, at most, $400,000 of the $650,000 loaned 2 years ago.
So, at least $250,000 has been lost and has to be reconciled somewhere. Remember this is one of 47 houses sold in the development. Where the loss ends up depends on what the original lender did with the loan (sold it with recourse? sold it without recourse?) - but somewhere, some entity is eating $250k.
Multiply this by thousands of homes across South Florida and tens of thousands across the rest of the United States and you have an irreconcilable quantum of loss. That's the essence of the problem, and in my view none of the Treasury efforts so far has gotten anywhere near resolving it.
A good old neck tie party with paulson the first guest to decorate a lamp pole on wall street, would do wonders.
There is no way this is a mild recession-no way. Anyone that believe that is delusional. This country is in big trouble.
Quite true...I don’t know how you resolve it. With unemployment increasing dramatically, you will have more foreclosures. It’s a vicious cycle.
Jim Rogers, that guy that is often on Fox is predicting food shortages because he is predicting that farmers won’t be able to get loans.
I read that and started seeking my financing now even though my LOC runs from March to March. I was thinking that maybe I can get my foot in the door before our local independent, home-owned band starts getting cold feet. I’m also applying at 2 banks, just in case, so I’ll at least have the wheels turning now.
The chemical company we deal with is offering 75K worth of credit on chemicals and fertilizers and it won’t be due until October so we told our salesman to get us a form.
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