Administration Declares GSE Model "Dead", Increases Down Payment Requirements, Sends Gold To Highs Of Week

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Fri, 02/11/2011 - 09:57 | 952429 papaswamp
papaswamp's picture

Oh yea so many will qualify with those amazing part time jobs. 

Fri, 02/11/2011 - 11:00 | 952594 financeguru500
financeguru500's picture

You won't need a loan once the prices of homes drop down to where they really should be.

Fri, 02/11/2011 - 11:01 | 952596 financeguru500
financeguru500's picture

Did I say YOU. I meant to say "Investors from other countries".

Fri, 02/11/2011 - 11:45 | 952734 TruthInSunshine
TruthInSunshine's picture

Good luck to all!

If FHA financing goes away and/OR anything more than the now 3% on a FHA loan is required, the housing market and, more broadly, the economy, is TOAST.

Think I'm exaggerating? If so, you don't know how the modern real estate market is staying alive, even if barely.

And if you think this approach on housing, which isn't the rapidly depreciating (until recently) and consumable product that automobiles are, will be limited to housing, think again.

Go back to 20% or even 15% down mortgages, conventional, and we'll see housing sales plunge far deeper than they have.

This is literally the shot across the bow.

Fri, 02/11/2011 - 11:57 | 952768 unununium
unununium's picture

There can be no surer sign that mortgage interest rates are heading higher, than the government getting out of the business.

Bloomberg carries a story today in which Jamie Dimon trashes the GSEs.  He must have forgotten the WAMU trash he's sitting on.

I think you meant this is figuratively a shot across the bow.

Fri, 02/11/2011 - 13:05 | 953119 TruthInSunshine
TruthInSunshine's picture

I meant literal 'shot across the bow,' as millions of homes will be good for nothing more than target/range sessions.

Sat, 02/12/2011 - 03:48 | 955381 Kobe Beef
Kobe Beef's picture

Good. Let's see that they are fairly priced then.

Government meddling in price discovery fails again. Long live the free market!

Fri, 02/11/2011 - 13:23 | 953216 trav7777
trav7777's picture

I'm forced to agree; without the effective subsidy that the GSEs provided to the housing market, we're looking at probably another 20% decline at a minimum.  The presence of a size buyer basically willing to take losses fluffed prices up far more than warranted.

Fri, 02/11/2011 - 09:59 | 952431 Xibalba
Xibalba's picture

Not to worry.  JPM is on the way!

Fri, 02/11/2011 - 10:06 | 952445 Xibalba
Xibalba's picture

from 8:59 to 9:05 silver just dropped .22 cents.  Blythe enters stage right. 

Fri, 02/11/2011 - 10:09 | 952452 bankrupt JPM bu...
bankrupt JPM buy silver's picture

Blythe just hit the sell algo's, you fuckin wench

Fri, 02/11/2011 - 10:11 | 952460 Xibalba
Xibalba's picture

You've got option expiry today in the paper SLV.  What will the 'custodian' do?

Fri, 02/11/2011 - 10:25 | 952492 In Fed We Trust
In Fed We Trust's picture

As  I was saying yesterday "The GSE model is Dead."

But the way they said it on NPR was that the "Government footprint in the mortgage market was to big" and steps had/were being taken to bring in private money.

Amazing how the President gets briefed the same day on the subject as I do!

This of course is just getting the law/paper work out of the way.

Let houses collaspe for another 2 years or 20 % decline , and that private money

money should start showing up form Goldman and JP Morgan to snatch up some steals in the GSE market.

Like I said, in the end the FED will own a large percent of all the homes in the US.

thru it's affilate members of course. "They Reluctently had to step in" will be Benarke's words.

The pistol in Bernake's hand is the interest rate.


Fri, 02/11/2011 - 11:08 | 952610 In Fed We Trust
In Fed We Trust's picture

I dont understand why this issue of the FED being the biggest landlord is never talked about on this site?

Isn't it true, that the FED with an increasing share of the GSE market (the biggest stake) and growing , will place this into private money at sometime in the future.

Private hands,  just means JP Morgan and Goldman Sachs. Houses should continue to drop in price , allowing for the fed to acquire a few million more units before the big garage sale.

Now home prices are 30-40% of their peak, as the FED sells its inventory to JP Morgan, Goldman Sachs, at a bargain price.  Seeing how these banks are part of the FED, they are really selling the houses to themselves!

Bernake can can rasie rates at any time and force millions more into foreclosure.

Will are dealing with the biggest baddest landlord of all time,

So, even though the GSE might be worthless, toxic, at the bottom of the bag are actually physicla homes, several million.



Fri, 02/11/2011 - 11:11 | 952619 In Fed We Trust
In Fed We Trust's picture

Ok I think I might of answered my own question.

During times of hyperinflation the price of realestate, is pegged.

So the group, controling the real estate and ownership of such are the winners at the end of the hyperinflation.

Meet the new boss. Same as the old boss...

Fri, 02/11/2011 - 11:48 | 952739 wisefool
wisefool's picture

Keepers of the "perks" i.e. McMansions, and the ability to leverage them in a post-modern "MTV cribs" world.

..... And people say religious types are morons reading obsolete books.

Fri, 02/11/2011 - 13:27 | 953234 trav7777
trav7777's picture

well, the income tax wasn't enough apparently.  I guess they figure by owning all the mortgages, they'll get their money back

Fri, 02/11/2011 - 22:44 | 954978 GreenSideUp
GreenSideUp's picture

I dont understand why this issue of the FED being the biggest landlord is never talked about on this site?

I've actually thought about this a bit, and tried to contemplate what the end game might be.   No matter what, it won't be pretty, and it certainly won't benefit Main Street. 

Fri, 02/11/2011 - 09:59 | 952432 monopoly
monopoly's picture

Nothing will come of this. The banks will not allow it and they run our govt.

Fri, 02/11/2011 - 10:02 | 952437 dick cheneys ghost
dick cheneys ghost's picture

lock stock and barrel. banks will never accept private losses. the taxpayer must be responsible for all loss.

Fri, 02/11/2011 - 10:16 | 952470 KickIce
KickIce's picture

Yeah, the Fed has already purchased much of this garbage at the bubble prices.  My guess is the banks will get to buy it back at the current value and the taxpayer will eat the difference.  Disgusting.

Fri, 02/11/2011 - 10:26 | 952486 plocequ1
plocequ1's picture

Taxpayers are becomming scarce. If you are unemployed , and alot of them i may add, and living in your car, How does one pay taxes?

Fri, 02/11/2011 - 11:03 | 952604 Rodent Freikorps
Rodent Freikorps's picture

Sales tax will still get you. At least that is local.

Fri, 02/11/2011 - 11:25 | 952661 plocequ1
plocequ1's picture

Thank you. I have to admit, I am getting a little worried

Fri, 02/11/2011 - 14:31 | 953525 JLee2027
JLee2027's picture

It's all going to collapse, and quite suddenly at some point. Buy and hold physical silver. 

Fri, 02/11/2011 - 11:10 | 952605 Agent P
Agent P's picture

Well, unemployment benefits are considered taxable income.  That is moot however, considering that roughly 45% of Americans end up with zero (or negative) federal tax liability.  This is not a recent phenomenon's an article from 2006 (peak of the "good times") showing the number at 41%.  If you don't like/trust the source, there are plenty of others out there.

I'm guessing some of the increase has to do with what you're describing, but some also has to be attributable to the additional tax credits recently enacted (lifetime learning credit, etc.).  Point is, there have always been plenty of free riders on the bus.

Fri, 02/11/2011 - 12:20 | 952891 KickIce
KickIce's picture

My guess, once they get control of all the assets, land in particular, they'll just convert to a digital currency.

Fri, 02/11/2011 - 10:30 | 952506 Rodent Freikorps
Rodent Freikorps's picture

I'm not paying for this.

That is going to be my war band's motto. After the Zombpocalypse, of course.

Fri, 02/11/2011 - 10:56 | 952585 In Fed We Trust
In Fed We Trust's picture

GSE reform won't be completed for many years, and certainly not before the next major financial crisis wipes out the entire securitization market out for good. In other words - more taxpayer money spent to pretend we are changing the status quo, when doing anything but.

Dear Tyler,

Anything coming out of DC with the word "reform" in it really means "new fraud"

Deep in these bs bills of reform, are the future tracks, and legal framework

that allows for legal future theft of assets that are in question. Meaning:

So i read your above piece, not only is this a pretend bill, but it the bill are the exact assets that they want to steal and when they want to steal them, and the reform laws that give them the advantage, or right out steal.

Fri, 02/11/2011 - 11:31 | 952682 Don Birnam
Don Birnam's picture

<< Anything coming out of DC with the word "reform" in it really means "new fraud" >>

Absolutely so; akin to the periodic economic bulls issued by the old Soviet Presidium -- and, in the end, likely just as resultant.

Fri, 02/11/2011 - 09:59 | 952433 Cognitive Dissonance
Cognitive Dissonance's picture

Just another example of the USA talking it's book in order to maintain (or prevent from plunging) it's financial credibility. There is no way to exit from the Mexican standoff. While they talk of reducing risk, that's all it is, talk. They fully understand that they must actually rush more people into the fight in order to keep the collapse at bay.

As Todd Harrison said back in 2008, they sold the car crash and bought the cancer. We are now seeing the effects of not only the cancer as it eats away at the body, but we are seeing what the chemo is doing to the immune system. The only thing remarkable about all this is the amount of abuse the body can take before it collapses into a bowl of quivering jelly.

Fri, 02/11/2011 - 10:00 | 952435 ColonelCooper
ColonelCooper's picture


Fri, 02/11/2011 - 10:11 | 952459 SheepDog-One
SheepDog-One's picture

Yep CD or in somewhat more laymans term theyre all full of crap! 'The amount of abuse the body can take'...hell theyre just in denial claiming the 100% life support terminal patient will soon be running the Boston Marathon...DENIAL is not a river in Egypt, central planners!

Fri, 02/11/2011 - 10:35 | 952512 DaveyJones
DaveyJones's picture

"The GSE model is dead!" Ironic Mr. President since the only financial institutions left standing are the ones that are "government sponsored." 

Fri, 02/11/2011 - 10:47 | 952551 Cognitive Dissonance
Cognitive Dissonance's picture

Does this mean "we the people" are sponsoring the government?

Unless we say "no" (and back that no up) we are in effect saying "yes" to everything the government is doing and saying. BTW it stopped being "my" government well over a decade ago. But even though I reject the present government as not acting for me or in my interests I'm still responsible for making an effort to stop this madness just like the Egyptian people are finally recognizing their own responsibility to stop the madness over there.  

Fri, 02/11/2011 - 11:22 | 952647 Agent P
Agent P's picture

Silence is acceptance.  You are correct sir.

Fri, 02/11/2011 - 11:24 | 952658 DaveyJones
DaveyJones's picture

those in the know know its all about backing up the no

Fri, 02/11/2011 - 10:57 | 952590 In Fed We Trust
In Fed We Trust's picture

You know my pain.

Fri, 02/11/2011 - 10:02 | 952436 eigenvalue
eigenvalue's picture

I think China will be screwed more than the US when the 2 GSEs finally default on their obligations. 

Fri, 02/11/2011 - 10:13 | 952462 SheepDog-One
SheepDog-One's picture

China cares less if theyre screwed, they can write off a couple billion unarmed peasants, what do they care? Here, they  know when TSHTF theres about 100 million armed americans at least that can wreak a whole lot of havoc.

Fri, 02/11/2011 - 10:16 | 952471 Rodent Freikorps
Rodent Freikorps's picture

Marcus Antonius:
And Caesar's spirit, raging for revenge,
With Ate by his side come hot from hell,
Shall in these confines with a monarch's voice
Cry "Havoc!" and let slip the dogs of war,
That this foul deed shall smell above the earth
With carrion men, groaning for burial.

Julius Caesar Act 3, scene 1, 270–275

Fri, 02/11/2011 - 10:29 | 952501 redarrow
redarrow's picture

No. China is not screwed, they have a lot of our manufacturing assets, they are good at reverse engineering. So if the US says, FU to china, they will reply FUT by taking ownership of all those factories and telling the Apples, P&G's of the world to shove it.

So we will end up exchanging GSE/Treasury debt for factories. Ain't life a bitch?

Fri, 02/11/2011 - 10:37 | 952521 SheepDog-One
SheepDog-One's picture

I dont see how people figure China is screwed. What do they care? Theyve got most of our manufacturing, and would hardly care about a billion less Chinese peasants. 

China already has us by the nuts anyway, and Obama just made the deal for 500 Chinese cities here in the US anyway. No americans say a word about it, ignorance is bliss!

Fri, 02/11/2011 - 11:17 | 952632 Dr_Dazed
Dr_Dazed's picture

500 "Chinese" cities to be set up in the US?  Now where'd that tin foil hat go?

Fri, 02/11/2011 - 12:53 | 953054 TruthInSunshine
TruthInSunshine's picture

No. China is not screwed, they have a lot of our manufacturing assets, they are good at reverse engineering.

I do not have personal animus towards the Chinese People, but - their leaders are not our friends, they have malice-saturated intentions, and the gap between their much-touted 'skills' and the reality of their ability to innovate or engineer is vast.

They have, however, edited 'Top Gun' footage and used it in an attempt to pass off the incredible capabilities of their new J-20 'stealth' fighter jet:


China uses Top Gun scene in its stealth fighter jet video
Fri, 02/11/2011 - 13:33 | 953273 trav7777
trav7777's picture

the article said "J10," which is incidentally a reverse-engineered Lavi.  Or else the israelis sold them the design.

the only things built well in china are in western factories.  Anything local is a counterfeit, cheap, and shoddy.

Sat, 02/12/2011 - 01:47 | 955261 TruthInSunshine
TruthInSunshine's picture


I know a highly skilled machinist who works for a boutique precision CNC shop that 'reworks' and fixes industrial machine parts.

90% of his work involves fixing bastardized Chinese parts, outsourced due to low cost, that are sent back stateside, because they are literally so out of spec that they won't even fit on their intended equipment.

He told me that it would be significantly less expensive and much more efficient to just craft these parts here to begin with, even at much higher original prices, as the things would get produced properly 99.99% of the time to begin with.

He jokes about it, but in an almost sad manner, because he knows that this insane loop is benefitting both him (he makes over $70/hour, non-overtime - he pulls 50% more than that with overtime hours- , but he is highly skilled) and his company, but he also knows that if this insanity isn't reversed, the Chinese probably will improve with time.

As an aside, this guy is so skilled, he reproduces out of production motor parts for older gen VW motors and Benz diesels (his employer allows him to use their equipment in his off time; the price of retaining a brilliant employee, I guess. And yes, he's an American of German heritage).

Fri, 02/11/2011 - 10:14 | 952464 Sudden Debt
Sudden Debt's picture


even the ugly chicks.

Fri, 02/11/2011 - 10:18 | 952474 Rodent Freikorps
Rodent Freikorps's picture

What's your point? Sounds like any bar at last call.

Fri, 02/11/2011 - 10:44 | 952540 kridkrid
kridkrid's picture

thank god for ugly chicks.

"I hope, you got... fat.  I hope, you got, really fat.  Cause if you got really, really fat, you just might want to see me come back... I hope you got... FAT"

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