Posted on 08/02/2008 9:55:02 AM PDT by SmartInsight
“If the FDIC is going to be overwhelmed, the $ 100K coverage won’t help. So limiting deposits is useless.”
If FDIC is depleted would not the feds provide funds for insuring up to 100K? In this environment I believe maintaining anything over that amount in any one bank is taking undue risk.
I don’t subscribe to a doomsday collapse or revolution but do believe the unwinding of this credit bubble will be painful to many or at least a reduced standard of living for a period of time.
Your points are well taken especially trusting in The One who runs the whole show.
The FDIC was overwhelmed with the S&L crisis. The government gave them the money to pay out insured accounts and not one penny was lost on an insured account. That will happen again. So your statement, “If the FDIC is going to be overwhelmed, the $ 100K coverage won’t help. So limiting deposits is useless,” is proven false by the actual history of FDIC becoming insolvent. History will repeat.
Thanks for that bumper sticker.
Yes, I heard that rumor about Kerry. Helping the Swifties sink his bid was most gratifying.
I’m curious to know your view on the current liquidity crisis and I would appreciate it if you would answer one question.
Do you agree that this is the worst US financial crisis since the Great Depression, and if you do not, then what was the worst US financial crisis since the Great Depression?
Good point there. I didn’t mean to imply (although it appeared that way) that a person should just go over the limit. Should have said, “Any deposit is at risk if what Mr. Cow says is true.” And, honestly, a scrunch in standard of living might have a few good side effects,like changing the sense of entitlement that you see around (that Socialist mindset that seems to have crept in, Mr. Cow referred to. That part I agree with). We might all get to think about what we should and should not value. And, thank you for your service, Sir.
Bad typo. Should have been "at a bottom and NOT THE bottom..."
“...I’m taking all this to mean that people are NOT nearly as desparate to sell as the media is making out.”
We have around 80 homes on our horseshoe type street, which connects to the main street running through the community. There isn’t ONE “For Sale” or “Bank Repo” sign on our block. A couple months ago, the three homes that were for sale (after coming down a very little bit on their prices) were all bought up within a month of each other.
I do need to add that I live in a nice family-friendly neighborhood with lots of amenities. Most of the folks have owned here for 5 to 8 years and seem to be smart with their money. Maybe that’s why we aren’t seeing the same foreclosure activity.
I would suspect that the worst financial crisis occurred at the end of WWII. If you look at the national debt with respect to GDP, it was, I believe, 10x worse than now. But, even if there are shocking consequences to the current situation, come and sit in my chair and listen to the hidden stories of money everywhere compared to twenty years ago. People are inheriting money from frugal parents, businesses are creating wealth, deals are being made that are making far more money than when I grew up in the sixties. We were tottering on the brink then and I recall the neighbor running over with a “Invest in silver before its too late!!!” book for my father.
The matter of living has always had a fear factor operating. Thelogically, I could argue that is to drive us to the One who really matters. Financially, I have found that prudence, hard work, settling into a good budget, and just expecting things to be bumpy are more workable ideas than to hold onto the international liquidity crisis.
But, I am astonished, astonished at the amount of money I see in people’s hands and as a CPA I see a lot of hands. There is a certain sloshing going on in the tub, granted. But, it is no worse really than any other time. Recall, great-grandma was very concerned about some bad guys riding out to the ranch when she and the kids were alone. What was that about liquidity?
Patently false. Unless by "many" you mean "some or few". More than 20% of those with Option ARMs from 2004 and 2005 were upside down on the loan as of 2006, and has to be far higher by now, since California house values have collapsed over 25% in that time. You can't refinance a home with negative equity. Banks won't do it.
Remember, not everyone on ARMs are ready to go belly up,
Further, 70% of those with Option ARMs are only paying the minimum, according to Fitch Ratings. This is catastrophic. When the rates reset, they are dead. And the rates are already resetting, not because the time is up to reset, but because by paying only the minimum, the loans have hit the trigger to automatically reset.
and those holding ARMs are a small overall percentage of homes,
Patently false, in California. 45% of all mortgages written in California after 2003 were subprime, Option ARM or Alt-A. The San Francisco bay area is nick-named the "Alt-A area". The numbers of Option ARMs and Alt-As combined are staggering and rival subprime.
and those hurting are no doubt even a much smaller percentage of that.
Patently wrong one last time. With 70% of Option ARM holders paying the tiny minimum and due to reset on homes that perhaps 50% of them are upside down on, I would predict that fully half of all Option ARM holders are in serious trouble and will be losing their homes if they aren't saved by the Housing Bank Bailout Rescue Plan.
One quick (thread hijacking) question, if you don't mind a fast freebie....
When my Dad died last year, we did the attorney thing, as his firm had redone the parental Trust two years before as both aging parents were becoming dementia-ridden. I got the POA and Trustee stuff.
When Mom goes in the next year or two (she's 87 and her Alzheimers is not gettin' any better, of course), should I pay the attorney another $3500, as with Dad, or let their CPA handle the final BS? *
*Dad was a CPA and sold the practice after he retired....we use that buyer's successor.
I remember the Alaska depression after the pipeline was finished. People adapted, recovered, and worked it out but many lost their ass. The numbers seem small today, but my sister and her husband bought a home for $80,000 that plunged to $20,000. Too honest to walk away, he paid the $60,000 loss out of his own pocket. The good news is, when they bough again, they later got a much bigger and nicer home for $50,000. Yes, they worked it out with much blood, sweat and tears. Lesser folks would have quit.
I remember the Texas depression after oil deflated dramatically in the mid-=980s. They worked it out but I have friends whose lives were irreparably changed in that depression.
I know you don’t mean to sound cavalier, but you do. Maybe you mean to sound optimistic, but there is going to be real severe pain among all those who were dumb/naive/unknowledgeable enough to think they were buying a home and are losing their ass this time around.
The only big difference today is, while Alaskans and Texans lost their 20% down payments, many this time around had 0% down and no skin in the game. They walk away clean or with HELOC money in their cookie jar. The 20% downs being lost this time are being extorted from you and me. We are the ones feeling the pain this time around.
And where do you live? How old is your neighborhood.
My mothers neighborhood in a very nice area of Carmichael, CA (a prime Sacramento suburb) is immune to the housing bubble and crash because of the stability and income of the upscale residents. Their home prices soared and collapsed like the rest of Sacramento, but they were not affected because they could all afford their homes and because there is constant demand for homes in that beautiful, old, stable, quiet, expensive, crime free neighborhood. It is unique in that respect.
So, is your neighborhood like Santa Anna or is it like Pacific Heights in San Francisco?
Where do you live and what is your neighborhood like? Did it ever have a rash of foreclosures?
Thanks for answering my question. I appreciate it sincerely.
Correctly anticipating the future is important for success. I have put my money where my mouth is, paying off all debt, selling my California real estate, lowering my standard of living, liquidating my assets, selling short the market, and increasing my gold investment.
If I am right, I will do well. If I am wrong, I will be poorer, as it should be. Either way, I call them as I see them, take my best shot, remain grateful for my good health, and do my best to live an honorable life.
There is nothing inherently good or evil about the various cycles in the our government, economy or society. They are what they are, and by and large I have only the most modest impact on them.
There are people who do well, stand tall and live lives of honor in the best of times, and in the worst of times.
I sense some hostility or denial from you towards predictions of gloomy economic times. Do I sense correctly? If so, why? If indeed we are embarking on one of the more substantial Panics (to use the term of the 1800's) or Depressions of the last few centuries, does that make you or I any more or less of a person?
I googled and googled but I can’t find the US post-war financial crisis after world war 2. What is it you are referring to.
In referring to today’s financial crisis I am speaking of...
Massive losses in financial companies
Huge insolvencies including Fanny, Freddie, IndyMac and Bear
A contraction of money and tightening of liquidity
Unknowable losses in Level III assets
Fear among banks to lend or purchase Level III assets due to the unknowable value of those assets
Collosal potential losses form derivatives
Potential collapse of the bond market
Unlikely but small possibility of losing the US dollar as the world’s reserve currency (not likely)
What comprised the financial crisis in post WWII USA? I can’t seem to find the details about it.
In mathematics, what we’re trying to say would be called a “localized minima.”
http://en.wikipedia.org/wiki/Maxima_and_minima
Still, I knew exactly what you meant the first time I read it and I agree completely with what you’re saying: the financial ignorance of the general population is astounding and horrifying.
I called a "bottom" last year in January, and subsequently bought a home in Ohio. I relocated this spring, and called a new "bottom" when I sold my house in Ohio. Timing is everything, and mine was rather poor. Still, priced right, houses will sell. Mine was on the market for about 3 months, which was pretty good for Northern Ohio right now. It's a bit of a depressed area compared to here in Tennessee.
One of these days, such people will be right, simply because housing prices won’t go to zero, but to call a bottom now ignores the wave of Option-ARM loans which are just starting to reset.
Just to note - not all ARM loans are bad credit risks. People have been using them for years. It's just the recent few years of relaxed requirements and ultra-low interest rates have brought the deadbeats into the housing market. I believe that you're right in that banks are actually starting to clamp down on poor lending practices. It's something that they should never have given up, regardless of the political pressure from the left (and yes, there was significant pressure to lend to high-risk borrowers over the last decade or so).
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