Is The Foreclosure Settlement A Shadow Bailout For Broke California
Just over a week ago we highlighted the desperate plight of cash-strapped California. With a $3.3bn short-term 'hole', they were looking for cash-management solutions under every rock and hard place they could find. Today we hear that California joins the Obama bank foreclosure settlement enabling $18bn of bank-funded cash (implicitly via Federal Reserve/Government coffers) can flow to the left coast. Los Angeles alone will receive $4bn which while eventually wending its way down to the consumer (to be spent and implicitly spurring further economic activity or perhaps more likely to pay down other debt in this balance sheet recessionary environment), as Bloomberg asks, "Why should a taxpayer in Houston or Wichita bail out irresponsible California homeowners, banks and the state’s public employees’ retirement fund?" To add to California's 'aid', BofA has become the first bank to sign up for the 'Keep your Home' program where Federal dollars are given to banks to encourage them to reduce mortgage balances on struggling (over-levered and perhaps once greedy) California homeowners. Certainly it is a happy coincidence that perhaps a short-term cash crisis could be band-aided in the Golden State by this well-timed joining of California to the settlement.
Taxpayers Prop Up California House of Cards: Steven Greenhut
By Steven Greenhut - Feb 9, 2012
Why should a taxpayer in Houston or Wichita bail out irresponsible California homeowners, banks and the state’s public employees’ retirement fund?
Yet that’s exactly what the Obama administration is looking to do in its latest effort to shore up a housing market that continues to sag as large percentages of Americans remain underwater in their mortgages.
The administration is pleased that California’s attorney general is now on board with the president’s multibillion-dollar bank settlement after securing tougher measures to benefit individual homeowners.
More good California-based news for President Barack Obama: Bank of America Corp. has become the first large mortgage provider in the Golden State to take part in a federally funded “Keep Your Home” program that would pay banks to reduce the balances that struggling California homeowners owe them.
Unfortunately, the federal mortgage-relief plan and the California foreclosure-aid fund are based on the same deep misunderstanding about the cause of the housing bust that led to many of the problems in the first place -- problems that were particularly pronounced in California because some policies here were worse than elsewhere. Greedy unregulated banks acted like drug pushers by enticing people to take on more debt than they could afford, the Obama administration thinking goes. This view is deeply flawed.
Houses as Casinos
The main debate among states was whether to provide more aid to individual homeowners or to provide greater latitude for states to sue these banks. There’s little discussion in the current negotiations about the role that government lending and land-use policies played in this mess or recollection about how the situation actually unfolded.
After the bubble burst, I recall asking a friend where all the money went as million-dollar tract houses lost half their value. He laughed, and pointed to his new RV -- a reminder of how prevalent it was for Californians to view their quickly appreciating houses as piggy banks. No doubt, predatory lenders engaged in fraudulent practices during the price run-up, but there’s much more to this story than that storyline.
Within months of moving from Ohio to Southern California in 1998, I noticed that home prices were rising rapidly and buyers were getting frenzied. We got out of our lease early, fearful that we would be relegated to permanent-renter status, and bought an aging $200,000 tract house. Within five years, homes like ours were selling for about $650,000.
It seemed as if everyone was refinancing, doing cash-outs, remodeling their places, buying new cars and taking Hawaiian vacations. Water-cooler conversations at work often revolved around discussions of “You’ll never guess what my house is worth.” After the crash, the same people have turned into victims, who apparently had no idea what they were doing and were preyed upon by banks.
Virtually every aspect of the lending process is governed by federal rules, so it’s nonsensical to argue that the banks were unregulated. Our political leaders seem to be forgetting, also, that it was direct government policy to arm-twist banks into giving out loans to unqualified buyers. The Community Reinvestment Act scored banks based on the number of loans they provided to low-income people.
Blame Federal Policy
As John McClaughry wrote in Reason magazine in December, “By 1995 the CRA had become a powerful tool in the hands of ACORN and allied activist organizations,” referring to the Association of Community Organizations for Reform Now. “Unless a bank could silence their protests by making (and passing on to Fannie Mae) the demanded amount of subprime loans, it faced serious difficulties in obtaining regulatory approval for branching, merging, and other corporate decisions.”
This stemmed from an ideology, supported in Republican as well as Democratic circles, that viewed homeownership as the key to a prosperous life. In pricey California, lenders -- and governments, which often offered residents down-payment assistance and low-interest loans -- got ever more creative so that they could help buyers afford median home prices that soared above $600,000 in many urban markets.
Everyone was in on the game. California wants a tougher settlement, the New York Times reported, to help the California Public Employees’ Retirement System recoup some of its losses. Calpers was on the leading edge of this nonsense, as it used borrowed money to build what later became the most upside-down community in the nation -- Mountain House, California, across the Altamont Pass in the Central Valley, where Bay Area residents priced out of their region could afford a home, provided they could tolerate the grinding commute.
If one looks at prices in most places in the Midwest and South during the inflating housing bubble, one will find increased prices and small spikes, but nothing like what happened in California.
California has some of the most extreme land-use controls in the nation. When demand increased, in less-regulated housing markets, builders were able to construct houses in a reasonable amount of time. In California’s coastal communities, it can take years to gain the government approvals necessary to build a new subdivision, so the market couldn’t respond. As a result, the stock of existing homes soared in price and builders went into the hinterlands to build new subdivisions for commuters. This is bad policy on any number of economic and environmental levels.
Jobs Come First
I don’t hear anyone proposing any policy fixes for that problem. Instead, we get proposals to help homeowners refinance their mortgages even though they have no equity in their homes, something that might save them a little money each month, but won’t do anything to solve the real problem of owning a home that is worth less than the mortgage.
The Obama administration has argued that the economy won’t revive until the home market is fixed, but the opposite is true. I own two rental houses in the Central Valley, purchased for about 25 percent of their prices at the height of the market. They receive rents that are about double the total cost of the monthly payments, yet there is an abundance of homes like this available. People aren’t buying them because they don’t have jobs and because the government rules now make it too tough to get the credit to purchase them.
Instead of bailing out bad behavior from banks and consumers, it’s time for policy makers to let the market work -- in lending, land use and economic policy. In discussing the Obama mortgage proposal, USA Today opined this week that the Republican Party’s challenge is “to come up with an alternative that goes beyond simply saying no.” But saying no is exactly what the nation needs now, especially if yes means another bailout for imprudent Californians.
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Yes.
ONCE again David Berman over at the Globe and Mail is up to his old tricks again. Hating on Gold and basically calling Gold investors gamblers.
http://www.theglobeandmail.com/globe-investor/markets/markets-blog/buffett-does-not-care-for-gold/article2332598/comments/
This country is fucked. Crony capitalism and preferential government handouts now ensure that there is no level playing field for businesses. The lack of fairly applied rule of law creates major uncertainty in any economic endeavor. The Feds are creating a business environment that is not navigable.
Innovation and entrepreneurial activity will flee the country, with what remains of capital close behind.
Re: capital fleeing the country... I tried to explain this to someone who would charitably be described as liberal, and they honestly, sincerely could not understand how capital could flee the country without the government somehow "getting their share" in the process. They were adamant that the government has a tax structure in place that would capture capital either as it's fleeing, or after it's fled since the Feds can tax people even if they're not living here or doing business here. This belief startled me a bit, since this was an "educated" person who whines about how jobs are lost by outsourcing offshore, so it didn't make much sense to me that they simply couldn't wrap their mind around the fact that capital follows the jobs.
CALPERS and the rest are still using 8% actuarial assumptions for year over year growth.
Despite being adult aged supposedly professional money managers pointing the fingers at everyone besides themselves as evidenced by the lawsuits et al-who will they point to for still using ridiculous assumptions in their models?
8% growth? Hahahaha... I was about to say they learned it from the Feds, but even the Feds aren't that optimistic. 8% means they took a double-dose of the blue pill.
It's not sexy but the CALPERS mess is a huge story,. Like most funds, it was foolishly set up with expectations of 7-8% annual return (7.75%). CALPERS website states they have "averaged" 7.5% over 20 years including 7.9% in 2011. yet the LA Times reports that in 2011 they earned 1.1% Cal Watch reports that of 2/3/12, CALPERS was $56 billion short of where it should be. Obviously the zero interest rate for eternity does not bode well for those with fixed assets.
Just for a few more laughs...
Texas Teacher Retirement System also assumes an 8% growth rate in the fund. They reprort in November of 2010 that "the fund is expected to remain solvent until 2072".
trs.state.tx.us
I wonder how many private airplane charters are hauling out cash, diamonds and gold out of the country.
No capital controls so long as more comes in than goes out.
Fuck Cali, they are all things amerika, with hollywood shit like "biggest loser". Nothing like watching two fucking hours of people that can't handle or deal with "their" fat asses.
Already pointed out by several, so yes. I wonder how those states that are hurting, yet providing power to californians feel about all this? Would be cool to see Arizona/Nevada shut the fucking power down. Where's their bailout?
they're not the 8th largest economy in the world
And what is California's Debt again? LOL, here let me fix that for you "they're not the 8th largest ponzi in the world"-fixed.
Supply lines can really be a bitch in the real world, but more to the point, one insolvent entity bailing out another, yeah, I am sure that will end well.
Apparently it can continue in new and creative ways for years like it has been.
Depressing.
Never knew a single liberal who wanted to understand math...never ! They understand taxes though.
if it's any consolation - i meant they're the 8th largest econ in world
naught "NOT"
My wife and I did without for many decades, Paid off our mortgage on time every month, put 2 kids through college (ok with some loans on their part but we still struggled) and what do we get???? #%&* politicians in this country!!!! This idiot will get re-elected since republicans are offering no competition. My grandparents and parents generation has to be rolling over in their grave what this country has turned into. They worked so hard to make this country the greatest in the world. Sickening what's happened with Obama, Timmy, and Benny!!!!!
They're rolling around in their social security and pensions.
Both are a myth from a time long ago that my generation will never get.
SS will go negative for the first time this year, anywhere from $50 - 250B (depending on unrealistic employment #s and unrealistic trust ROI #s)---- No big deal.
Your kid's kid's will still be paying for your parent's SS.
You people still comment as though your opinion matters. The government doesn't give a fuck what you think. They simply do as they wish. Once you understand that, everything will be fine.
California has 55 electoral votes! If Obama ends up behind in the polls, don't be surprised to see him start literally handing out cash to buy more votes...whenthe population figures out what he's doing, it's going to backfire (like any deal betweenthe EU and Greece)...when he bribes one group the other losers will stick their handsout an say,"Where's mine asshole."
Shadow bailouts are the ones that occur right in front of your eyes, correct?
yeah, but no one notices because they're all watching TV.
no one notices because they feel completely disconnected and ineffectual, kinda like a bad dog with no balls...
no one notices because they feel completely disconnected and ineffectual, kinda like a bad dog with no balls...
Actually they are playing on their ipads purchased with government assistance while eating cheetos and ice cream bought with food stamps while waiting for a phone call on their government paid for cell phones while sitting in their Section 8 rent subsidized apartment waiting for the cable guy to fix their cable TV which they get at below market cost because they are out of a job. Yes really!
A little QE for votes exchange never hurt anyone. The next shot will have to come from Shalom as MBS mopping is long overdue.
BTW why no mention of this?
http://www.telegraph.co.uk/finance/economics/9071555/Bank-of-England-inj...
Fed moves in lockstep with BoE see overlay.
Let Cali go down!!!!!!
i live in cali and i agree! fuck this welfare state!
Let it go down? Is there any other option in the long run?
debt or earthquake. one will bite california before the other. shit. that reminds me. i need to switch jobs and move OUT of this fucking hell hole.
I live in California. You know what? FUCK California. Sick of these mother fucking knownothings who spent $750k on overpriced stucco boxes, and now these dopes have the temerity to complain about debt and being underwater on shit property.
If you live in another state and hate California because of this bullshit bailout -- believe me, there are many in California who are with you.
Only a matter of time before this bullshit state needs to once again issue IOUs to businesses and taxpayers because California is bankrupt and can't add the asset and liability sides of the ledger.
Count me in. It's the only way to stop the madness. (Oh yeah, I live in Ca, too.)
I live in CA and I'd say to those who bought houses that they weren't meant to able to afford: may God fuck you all
There's no victim here, only whiners who just can't let go of the good years and think house price appreciation is an entitlement. Let them go down. Let them learn what it means to enter the market.
Also live in Cali am sick of the bs. Balancing a budget is simple math not multi variable calculus.
Saw a fox news investigation that made me so mad last night. Some woman had filed 132 claims for hit and run and Medi-cal idiots paid out 250k in claims and then she somehow used the invoices to get her supplementary insurance to pay her 90k in total.
The odds of having 2 hit and runs is tiny. The odds that someone is hit and run 132 times in a couple of years is nil. F-ing morons in Medi-cal couldn't figure it out in the first 25 claims in a row.?
Couldn't find a video posted online. Will share if I find it soon. Will make your blood boil at the level of waste fraud and government incompetence.
Guess who the largest shareholder of face book want's to be? By all means, GO ALL IN!!
But who did you expect to be initial shareholders - Ma & Pa Kettle from Backwoods, KY. Large firms get an advantage because they provide the seed money and help for start-up businesses. The concern can always choose to repay the money but almost all agree to either a share of the profits or first dibs on shares.
I have to disagree with you on this, TD, most of that cash will never be seen by anyone. It is almost all "soft credits" - i.e. if the servicer reduces the interest rate on a mortgage from 7% to 4%, the lost interest will be counted against the deal.
Of course, as you pointed out, the borrower WAS paying nothing, so this will actually take money out of pockets.
Plus house prices will decline which will put even more borrowers into distress.
The short term money may help California, but the medium term consequences (i.e. consequences that will become evident by this summer) will definitely not help California or any other state.
Seconded, the hard cash component of the settlement earmarked for states is $3.5 billion, and that is to be split by all states.
http://www.justice.gov/opa/pr/2012/February/12-ag-186.html
Don't question too much, you would a terrorist.
I hate to break it to you, but posting on here makes you one by default. The government can call us terrorists, but history will have us remembered as patriots instead.
+
Get out and buy some gats if you don't have any yet. Join us.
We are Legion.
We are Mighty.
What a stupid ideal.
Call a patriot what he really is: a pretentious ultranationalist. If you think that label connotes libertarian values, you have been seriously mindfucked along with the rest of the plebes.
Cali could easily issue debt if they wanted to.With yields so low they are still not issuing anything to speak of.If they were in serious trouble they would be issing a crapload right now.
Zero sledge is running out of topics.
You're acompletedouche. Kudos.
Yes I am,I try my best
I hope the bears are going to be right about something soon.Let's face it,they have been wrong about everything else so far.
after 13+ weeks and 7 posts, we had hoped you would be doing a bit better, frankly
i guess even the most misguided shithetforbrained moron will stand out a porch for 3 days, too, eh?
Ha, he down voted you and up voted himself. Take that!
well, maybe there's hope, then!
LOL at least he knows how to fight dirty and cook the books, too!
His former position was CFO at Diamond Foods?
California can try to issue all the debt it wants, but who is stupid enough to buy it?
The Fed. Been a "one world" economy for quite some time really.
the greeks!
Who would buy the debt?? Seriously, who?
MF Global.
but only with other people's money...
here is guy who has a dozen posts in 6 weeks!
he sure sounds like he's gonna be a big asset here, too, doesn't he?
State of California Debt Clock
What does post count have to do with anything?
And would YOU buy California debt?
If you are wondering, the sane answer is no.
A: posting tends to indicate that people are following the dialogues, here, and are (more) involved with some of the thought and even critical thinking
or, you can just ask a buncha questions and pretend they're either too tough for you, or that you "already" know the answer, so you can go "rhetorical" at will?
wowser!
here: two more questions! and one "sane" answer, too!
but now, you are, for some reason, addressing me, so i'll play along and pretend to answer these troll-like 'questions', ok?
1) already answered
2) no, i wouldn't buy CA debt; but IF you understand what this means: but i wouldn't buy tampons, either then perhaps you can undertand that altho nothing is for everyone, there is over $361 Bil of CA debt outstanding, and "somebody" owns every fuking penny of it. trust me
3) some may even be "sane", too! who knows? but, these IOU-contracts are "interest bearing" and people DO buy them. i could ask you, but i'll save time and just tell you: that isn't my fault! i didn't do that!
1 in 9.5 in California on food stamps.
That's good. The coming riot crowd grows bigger every day.
hey, J_Lee!
thank you for actually looking at the link!
that grabbed me a little, too!
the coming riot crowd? dude, all it takes is for the lakers or the raiders to win and believe me, all the cockroaches will crawl out of their shithole and burn some shit down. that's just how we roll here in southern california.
if you want to talk about the coming riot crowd, try replying to J_Lee, but thanks for all the intel about the cockroaches!
"The coming riot crowd grows bigger every day."
As the frmr. governor would say: "All dey want is food for God's sake."
munis are on a tear......including cal and ill
why? kool aid consumption has doubled
Anyone know a good lender? I want to leverage up on PCK.
Can't lose.
Sarc off/
The notion that California will use the money to pay down the debt is amusing, although I suppose if by "debt" you also include their unfunded liabilities like pensions and social programs, then yes, it will be used to "pay the debt". California can no more control their spending than a child with a sweet tooth can control his candy consumption. They will see this a short-term reprieve from their fiscal obligations, not as an opportunity to fix things.
give gov. brown some time,... the man is brilliant, and, a realist!
HAHAhaha... you're referring to "Governor Moonbeam" as a realist? You just made my morning, thanks for that.
yeah, that corrupt fucker who passed on creating a state bank because wall street served us so well!
huh?
Oh hell no, they plan to plough it into teachers, public safety and prison salaries and pensions.
There's a columnist at the Sacramento Bee who has been covering the Capitol forever, it seems. I don't know how the man does it but if I were him I'd be dead drunk most of the time. I've been reading him for about 15 years, first when I lived in Sacramento, later via a local paper and the Internet. His name is Dan Walters and here's his latest column:
http://www.sacbee.com/2012/02/07/4244226/dan-walters-jerry-browns-tax-plan.html
Unrelated, but I am curious.....who or what is ABC Media, LTD?
Good question... I never noticed that before.
When did ABC Media become affiliated with ZeroHedge?
This must be recent... Last internet archive capture does not show the link...
July 23rd 2011
http://web.archive.org/web/20110723131513/http://www.zerohedge.com/
Looks like they are a marketing firm in London.
Registar entry abcmedialtd.com. "This site is currently being updates" is the only message on that address.
Domain Name.......... abcmedialtd.com
Creation Date........ 2002-08-15
Registration Date.... 2002-08-15
Expiry Date.......... 2012-08-15
Organisation Name.... ABC Media
Organisation Address. PO Box 61359
Organisation Address. Sunnyvale
Organisation Address. 94088
Organisation Address. CA
Organisation Address. US
More from http://networktools.nl/whois/zerohedge.com
ABC Media Ltd P.O.
Box 814 Sofia, Sofia 1000 BG
Domain name: ZEROHEDGE.COM
Seems to be Tyler's company.
lol did someone really -1 me for asking who ABC Media is? That's funny.
Probably that slewie reject who wants to buy cal munis.
no, i didn't junk you at all, but have actually tried to communicate w/ you
you seem to not understand much of anything except how to ask "innocent questions" which many here would find quite "numbskull"
for example, if i wondered who ABC media is, i would try to find out, myself, and so would many here, altho as we see, some also think that you have (finally) asked a "good" question
not me, tho!
people can see what you're doing, here
it's not complex and you're way less clever than others who have flamed out horribly, trying the same bullshit
as i tried to say, already, if you spend some more time and effort here, you might do better and undertand the dynamics a bit more
again:
if you choose to ignore what i'm trying to say to you, i won't be surprised
but, if you just wanna have a day of fun on zH by posting this non-stop drivel here on: Is The Foreclosure Settlement A Shadow Bailout For Broke California that's sure up 2u!
you might be surprized at how much people here know about mental health, trolls, and people who can't think straight, but...probaly not, tho...
sad, but true...
i don't think channeling ori is gonna do too much at this point, either, btw..., but it is very interesting behavior to many who enjoy this site, i would think...
ABC Media, LTD is the Registrant for Zerohedge.com. Wikileaks has got nothin' on Zerohedge. Hosting in Switzerland, Registrant in Bulgaria. You'll need the cooperation of the "Informationsdienst des Bundes", "Darzhavna Sigurnost" and KGB to get close to TD and the ZH Boys. http://pastebin.com/d/zerohedge.com Domain Information About: Zerohedge.com Domain: zerohedge.com Our Estimate Value: $783,242 USD and makes $1,108 USD a day Estimate Visits Per Day: 347,123 visualize this number! Hosting Location: in Switzerland Website IP: 178.209.48.14 Website Organization: OrtCloud GmbH Website ISP: Nine Internet Solutions AG Alexa Rank: #1,976 visit alexa Google Pagerank: 6 GEO Location Of Server: Switzerland Whois Report Registrant: ABC Media Ltd P.O. Box 814 Sofia, Sofia 1000 BG Domain name: ZEROHEDGE.COM Administrative & Technical Contact: Hristozov, Georgi P.O. Box 814 Sofia, Sofia 1000 BG +359 2 8651213 Registrar of Record: easyDNS Technologies, Inc. Record last updated on 26-Aug-2011. Record expires on 11-Jan-2017. Record created on 11-Jan-2009. Domain servers in listed order: DNS1.EASYDNS.COM 64.68.192.210 DNS4.EASYDNS.INFO 194.0.2.19 DNS2.EASYDNS.NET 72.52.2.1 DNS3.EASYDNS.ORG 64.68.195.10 Domain status: clientTransferProhibited clientUpdateProhibited
The ferry Oryahovo- Beckett, crossing the Danube, is one of the main transport corridors from Bulgaria to Romania. This is the most direct route from Sofia to Râmnicu Vâlcea, Romania, Ukraine and other countries.
Batshit
http://nymag.com/print/?/guides/money/2009/59457/
http://rationalwiki.org/wiki/Zero_Hedge
http://www.nypost.com/p/news/business/item_hn6OGbJ7XLE5BXvLDLA2oK
http://blogs.reuters.com/felix-salmon/2009/08/21/disaggregating-zero-hedge/
http://survivingtoughtimes.com/blog/tag/dan-ivandjiiski/
batshit
silli me ... I thought FB IPO was scam to bailout CA.
guess what? WF [Wachovia] will join BAC and then there will be two, making for a competitive market. next will come others jumping in - it's a long overdue catalyst that can't get worse but only better
jmo
Look for Kamala Harris (CA-AG) to be standing side by side with Obama and Holder on this year's Christmas card.
Another corporate slag doing G_d's work.
Maybe she can now go work for the Fed in "consumer protection."
wait till we build a new "bulletTrain" which will be almost as fast as driving!
..we'll be using Chinese know how and equipment for it....
You have a desire to rapidly travel from Bakersfield to Fresno? Or the reverse?
L0L!!! no!
i didn't vote for it!
i'll ride my bike!
but guvernatorMoonbean is now claiming this is the answer to JOBS in california! have you not heard? the entire state economy and the future of cali now depend on this styooopid fuking train!
wtf, if tyler is right and the tribute keeps flowing from Dem2Dem, maybe it is better than building more prisons and training more screws
'hi-speed' rail along the fault lines between SF and Tijuana! yeah! that's the ticket!
CA's very own version of the bigDigTM
i could do the ad campaign: 5X as expensive as flying or driving, with none of the advantages!
just kidding. you could get off in bakersfield or freno! without a parachute, of course...
CABigDigTM
Since everything is backward here, I think you could do a full ad campaign with that name and it'd succeed, Slewie. (Few here would know to what you're referring.)
The Bold is stuck and it won't come off, dammit... Does this post make me look emphatic?