Posted on 05/16/2021 6:50:19 PM PDT by blam
One week ago, we said that in what is increasingly a stagflationary burst (or, as BofA put it “transitory hyperinflation“) right out of the 1970s playbook (and that was even before the latest blistering hot CPI and PPI numbers printed a few days ago)…
… amid this dismal “transitorily hyperinflationary” landscape where those whose incomes aren’t similarly hyperinflating find themselves at risk of being unable to afford a roof above their head, “there was one ray of hope: renting, with rent prices tumbling in recent months and according to the BLS’ monthly CPI metric, rent inflation had just dropped to the lowest in a decade, just below 2.0% annually…
… “which due to the way the CPI basket is weighted acted as a key anchor on overall CPI rates, and served to distort the broader inflationary picture. In short, the Fed would look at the relatively tame core CPI which was only tame thanks to “tumbling” rents and would conclude that there is nothing to worry about.”
The problem, as we cautioned, is that rents were about to soar, after American Homes 4 Rent, which owns 54,000 houses, increased rents 11% on vacant properties while Invitation Homes, the largest landlord in the industry, also boosted rents by similar amount. The other problem is that even without the rent hike, CPI has been undercounted by roughly 50% because if one actually uses house prices as an input in calculating shelter inflation instead of the politically accepetable owner-equivalent rent, core CPI would be about 8.5% (as discussed in “Biggest Rise In Consumer Prices In More Than A Decade Is Understated By Half.”)
Fast forward to today when in a note from Goldman’s economics team, the bank effectively echoed everything we said, and warns that in addition to all the other widely discussed inflationary pressures – most notably the surge in wages as the labor market collapses thanks to Biden’s trillions – it now expects that “a national housing shortage will fuel substantial home price appreciation for at least a couple more years.” To estimate the spillover to shelter inflation, Goldman then uses city-level data on home prices and rents and finds that 5%-15% of the rate of home price appreciation gets passed through to shelter inflation over a multi-year horizon.
(snip)
I got cash
“Besides which, wasn’t GS one of the largest contributors to the prior financial crisis in 2008?”
__________
Not really.
__________
How so, “not really”?
Huge tranches of unstable and chronically failing residential mortgage-backed securities marketed by GS, and sold by GS to credulous longtime clients it had deliberately lulled to sleep, were collectively “one of the largest contributors to the prior financial crisis in 2008”.
And all you bother to say is “not really”?
We may miss the very top of the bubble but we are selling out now and taking the profit. House prices in our neighborhood have skyrocketed. One of our neighbors sold their house 15 minutes after the sign went up.
I have nieces and nephews who bought small inexpensive homes about three years ago when prices bottomed out. Happily they told me they are not selling. They could make a killing, selling those houses now. There is a problem with selling their home, where would they live after the sale? Home prices are insane in their area even on fixer uppers. Even with a substantial amount of equity from the sale, they could not afford to buy another house at current prices. If they did, when that bubble bursts, they would be stuck with a massive six figure mortgage in a house worth far less then they bought it for. Housing prices like water finds its own level. When it does either you are above water or under water. Personally, I owe far less then the reported tax value of my house back when prices were at their lowest. I think I will stay pat because when this shit hits the fan it will be a disaster. Not even factored in are the number of people in apartments that may be facing eviction n the next 30 - 40 days.
20 year marriage here.
What you have 15 or 30 year mortgages?
Mine is 10 years and required a 30% dp. (That’s standard in the Philippines).
$2800 a month through :(
This lists the amount each bank received. Fannie and Freddy aren't listed at all, I guess because they aren't actually banks.
https://money.cnn.com/news/specials/storysupplement/bankbailout/
There were some huge mortgage bankers like Washington Mutual that were not bailed out, so they don't even show up on the list.
During the frenzied days of September 2008, as the U.S. financial system teetered on the brink of collapse, the government chose winners and losers.Washington Mutual, the country’s largest savings and loan bank, fell into the latter camp.
Despite its size – the bank had $307 billion in assets – it wasn’t quite big enough to be considered “Too Big To Fail.” So on Sept. 25, 2008, federal regulators marched into its headquarters in Seattle and seized the bank, turning over its assets to JPMorgan Chase for $1.9 billion.
The collapse marked the largest bank failure in U.S. history, far bigger than that of Continental Illinois, which failed in the 1980s and had just $40 billion in assets. Despite this tantalizing selling point, WaMu’s failure hasn’t received nearly the public scrutiny that many of the other casualties of the financial crisis have received — Bear Stearns, Lehman Bros., AIG, etc.
Another huge financial institution that received no bailouts was Lehman Brothers. In fact their collapse was what ignited the crisis. The Lehman Brothers bankruptcy was the largest in U.S. history.
Lehman Brothers was one of the first Wall Street firms to move into the business of mortgage origination. In 1997, Lehman bought Colorado-based lender Aurora Loan Services, an Alt-A lender. In 2000, to expand their mortgage origination pipeline, Lehman purchased West Coast subprime mortgage lender BNC Mortgage LLC. Lehman quickly became a force in the subprime market. By 2003 Lehman made $18.2 billion in loans and ranked third in lending. By 2004, this number topped $40 billion. By 2006, Aurora and BNC were lending almost $50 billion per month.Lehman had morphed into a real estate hedge fund disguised as an investment bank. By 2008, Lehman had assets of $680 billion supported by only $22.5 billion of firm capital. From an equity position, its risky commercial real estate holdings were thirty times greater than capital. In such a highly leveraged structure, a three- to five-percent decline in real estate values would wipe out all capital.
GS just wasn't at the center of the mess. The idea that they were is a bogus story the left likes to tell, because they are seen as representing Wall Street.
My house went up $10K in one day on Zillow. And that was before I mowed the lawn.
Didn’t GS invent or at least horribly misuse RMBSs?
Didn’t GS morph into a bank at that time in order to qualify to receive bailout money?
Are you an apologist for GS?
The vast majority of RMBS are created by the huge government entities known as Fannie Mae and Freddy Mac. Fannie Mae was created during the Great Depression, solely for that purpose. Freddy Mac also does nothing but RMBS. Have you ever heard of them? They got bailouts that dwarfed any other institution. Saying GS invented them is bizarrely ignorant.
Maybe they did horribly misuse RMBSs, but I wouldn't assume you know what you're talking about. Do you have a link?
Didn’t GS morph into a bank at that time in order to qualify to receive bailout money?
Not that I know of. Bailouts had nothing to do with whether they were a bank AFAIK. Do you have link?
Are you an apologist for GS?
What exactly is it that I'm apologizing for? That's the loaded question technique, like "When did you stop beating your wife?".
You’re definitely avoiding the questions, minimizing GS’s malign role, accusing another of what you yourself are guilty (ignorance), and lazy (look up “apologist” please).
Distinctly troll-like behavior.
GS, an investment banking concern, saw that only regular banks were permitted to line up at the trough. GS reorganized as a bank and backed up a fleet of 18 wheelers. Next time please don’t stay ignorant for so long. It’s tiresome.
I have told you it was not only for banks cretinous one but it doesn't sink in, because you're stupid. For example, AGI, a huge insurance company, got bailed out.
Former Federal Reserve Chairman Ben Bernanke reported that the $182 billion bailouts of the American International Group made him angrier than anything else in the recession. Bernanke said that AIG took risks with unregulated products like a hedge fund while using cash from people's insurance policies. Bernanke added that the government had no choice but to bail it out. Its demise would have created the same kind of economic collapse that occurred when Lehman Brothers went bankrupt in September 2008.
The Treasury Dept. was at liberty to bail out anyone they wanted to. But you persist in this "reorganized as a bank to get bailouts" fairy tale.
You're also moving the goal posts in imbecilic fashion as trolls typically do. Getting bailout money is not related to your original claim, that they largely created the mess.
If someone's acting like a troll it's you.
How hard are you willing to look on your own before gleefully labeling your humble interlocutor as a dunce?
This from an online Fortune archive (from the looks of it, it’s from circa 2009 or 2010):
25 top-paying companies
21 of 25
21. Goldman Sachs Group
Average total pay: $122,000
For: Other Exempt (Analysts, Program Analysts, Associates and Professional Non-Exempt)*
Best companies rank: 24
Wall Street’s meltdown is so 2008. Goldman - which reorganized as a bank holding company, received billions in government help, and repaid some $10 billion in Troubled Asset Relief Program debt with interest this past spring — generated billions in profits in 2009. In the first 9 months of that year alone, Goldman set aside $16.2 billion for compensation, enough to pay employees nearly $500,000 apiece.
Although the firm said that its total compensation was lower than in 2007, a political uproar is already in full swing. To calm public anger, Goldman may pay more of its bonuses in stock, or ask employees to donate a percent of their earnings to charity. And the 30 top honchos at Goldman have agreed that instead of the usual cash payment, they’ll take their bonuses in the form of stock they can’t sell for five years.
No matter how it turns out, all employees will surely do well. The lowest-paid employees get at least $6,000 pumped into their 401(k) accounts. Goldman’s stock grant plan was expanded to include more employees. Cash bonuses for much of senior management beyond the top 30 were expected to be in line with the 2008 payout, when Goldman awarded bonuses of more than $1 million to 953 employees and bonuses of more than $5 million to 78 executives.
My recollection appears to be correct, lasereye.
Your mileage may vary, but you might want to reconsider your overall approach to discussions like this. Idiocy? Fairy tale? Where do you get off with saying that kind of stuff in a decent forum like FR?
Here is some more information I just found.
Footnotes with sources are provided at the link.
A quote from the below article (unfootnoted) reads as follows: “In 2008, the New York Federal Reserve approved a change in Goldman Sach’s legal status from that of investment bank to bank holding company, enabling it to qualify for a government bailout.”
https://www.sourcewatch.org/index.php/Goldman_Sachs
Bailouts
Bailout amounts
TARP Bailout
On October 28, 2008, the US Treasury paid Goldman Sachs $10 billion in exchange for Goldman Sachs shares as one of the six large banks initially given funding from TARP intended to unfreeze credit markets. [34][35][36] This bailout was done through the capital purchase division of the Troubled Assets Relief Program (TARP). The congressional oversight committee for TARP calculated that the Treasury paid $3.5 billion more for stocks than they were worth. Around the same time Warren Buffett’s firm Berkshire Hathaway bought $5 billion in Goldman Sachs shares but paid less for them than the US government did. [37]
In its 2009 letter to shareholders, Goldman Sachs acknowledges that the bank and its shareholders benefited from government intervention during the financial crisis: “Looking back on 2009, it is impossible to know what would have happened to the financial system absent concerted government action around the world… Goldman Sachs is grateful for the indispensable role governments played and we recognize that our firm and our shareholders benefited from it.” [38]
Goldman Sachs’ Chief Financial Officer David Viniar said in February 2009 that the firm was eager to repay the TARP money because of the restrictions on executive pay that came with it. [39] In June, 2009 Goldman Sachs bought back its shares from the government for $10.04 billion. [40] It also paid the government an additional $1.4 billion to repay warrants and cover dividends. [41]
Goldman repaid the $10 billion TARP money it received in June 2009.[42]
In September 2008, as the financial crisis peaked, Goldman Sachs ceased to be an investment bank and became a bank holding company[43].
2021 = Transitory
2009 = Unexpectedly
2017 = ORANGEMAN BAD REEEEEEEEE
I was reacting to your calling me a troll I guess, but I should not have done that.
You were right that GS was reclassified as a bank. Their extensive government connections may have helped them. I stand by my conclusion that they were not at the center of the mess. It would have still happened and been just as bad if GS never existed.
Fair enough, thanks. I suppose I shouldn’t have been so quick to toss the T-word into the mix. -OGINJ
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.