Economy

Greenspan Admits “Mistake” calls the Credit Crisis a 100 Year “Tsunami”

REALonomics has roughed up Alan Greenspan over his support of the concept of subprime lending and his denial of any contribution to the collapse of the credit markets. See the post.

It looks like Mr. Greenspan has finally started to step up to the plate with acknowledgements that his thinking was less that stellar.

Today, in a hearing before the House Oversight Committee Greenspan finally acknowledge, if only by innuendo, that his judgment fell short of what was needed to predict the housing market decline.

“Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment.

With respect to Greenspan’s belief that banks would act in the best interest of shareholders, Greenspan said his thinking was wrong because there was, “a flaw in the model that I perceived is the critical functioning structure that defines how the world works.” The current crisis was referred to by Greenspan in his opening statement: “We are in the midst of once-in-a-century credit tsunami.”

In essence Greenspan called this a “mistake” in how he viewed the integrity of banks and mortgage companies. Makes us wonder if he just fell off the turnip truck.

Of the current financial crisis, Greenspan said that it “turned out to be much broader than anything that I could have imagined.”

Unfortunately, Mr. Greenspan has not yet acknowledged his “mistake” in his endorsement of subprime lending as something good for consumers. Perhaps another day.

Bush to Federalize Nine Major Banks

Syndicated from iVoteAmerica

Well, by George, he’s given new meaning to “compassionate conservative” by federalizing the banking and capital systems on his way out of office!

Don’t let the swinging door slap you backside on your way back to Crawford, Mr. President.

According to the Bush Banking proposal, nine major banks have accepted the notion of partial government partnership. These banks are: Bank of America, Merrill Lynch, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, State Street and Wells Fargo.

Watch this video:

George Bush is implementing the G7’s recommendations for government partnership with American banks. In other words, free money from American taxpayers to shore up the international economy.

Is this the new federal socialization of our economy? Bush said, “The government’s roll will be limited and temporary…” Can anyone name a federal program which, after implemented, remained limited or was temporary?

For the full story, visit this morning’s (Tuesday, October 14, 2008) article by Washington Post Staff Writers Howard Schneider, David Cho and Neil Irwin, entitled “Bush Defends Government Bank Investment.”

Home Price Declines Hit New Records: What Can the Industry Do?

The question for the real estate industry to grapple with in the midst of the credit crunch is how can we help struggling homeowners in severely depressed markets such as Las Vegas, Phoenix, Miami, Los Angeles and San Francisco?

According to a recent Standard&Poors/Case-Shiller home price index of the top twenty metropolitan area home values, we are seeing record declines. Get a copy of the report.

Here’s the breakdown synopsis (source: Standard&Poors/Case-Shiller) (arrow highlights by REALonomics):

In these and hundreds of other markets, home value declines are taking a toll on individuals and families whose financial security is predicated almost entirely on home ownership.

There are at least three things local real estate companies in partnership with mortgage and title service providers could do for struggling homeowners.

1. Set up financial support workshops led by experienced brokers/agents designed to coach homeowners with respect to their property values, the current trends, their specific mortgage situation and how to take positive steps to stay in their homes unless they absolutely must sell at this time. Such workshops should utilize skilled mortgage service counselors (not loan officers) who can give them answers;
2. Real estate agents in troubled markets should be literally returning to the old practice of knocking on doors, not to get listings but to meet homeowners as “Property Consultants” to discuss specific home values within their neighborhoods and offer advice. In addition, brokerage firms should deliver resource information to homeowners that will advise them about market conditions, refinancing and other information they need;
3. Brokerage firms should turn a portion of their print media budget and Internet costs toward creating blogs that are specifically administered by trained “Property Consultants” who can interact with property owners and deliver solid advice in real time.

During the next 24-36 months brokerage firms who want to build and retain consumer loyalty and predisposition should take a serious look at engaging in the creation of a group of “Property Consultants” who engage homeowners who are facing uncomfortable times.

Such an emphasis sends a powerful signal to consumers that we are serious, skilled, well trained, competent and knowledgeable professionals who can and will assist them with any property question they have, including financial counseling.

Deal or No Deal – Play America’s Game of Chance

The following PhotoBlog political post is syndicated from iVoteAmerica.com, a companion site to REALonomics, where you can vote in polls and influence others with your comments about contemporary political topics.

Cast your confidential vote for President at iVoteAmerica.com.

—– syndicated post from iVoteAmerica begins here —–

Join the game that has taken America by surprise!

Previous big winners include Wall Street, the Mortgage industry and foreign investors including China and many others. Register today, login and play!

Everyone is automatically a contestant and the stakes have never been higher. Go ahead, put yourself on the line.

—– syndicated post from iVoteAmerica ends here —–

The Federalization of our Financial System at your Expense

REALonomics Editorial

We now own what we cannot control. We are witnessing the Federalizaiton of the Financial Systems of America. Backed by a fickle Congress and flanked by Federal Reserve Chairman Ben Bernanke, President Bush and Treasury Secretary Henry Paulson, contrary to their former political beliefs that government should stay out of the private sectors of the economy, took measures today to endorse the Federalization of our money systems.

Q1 - What does this mean to the real estate industry?

Clearly we are entering spooky waters wherein we dared never enter before. REALonomics believes the move by the government will paralyze the industry making home buying and selling incredibly difficult, if not impossible, in some already paralyzed markets. Home and commercial property values will assuredly decline even more, reducing the networth of the industry and its investor and home owner base.

Q2 - What does this mean to the mortgage industry?

Expect huge consolidations greater than the Bank of America’s absorbtion of Countrywide and Merrill Lynch. With this consolidation of the financial titans, mega titans will be created and essentially be required to submit to a new set of tightly regulated lending rules. It will be harder and harder to borrow and lend. This will create a over-regulation of the market and further drag on mortgage recovery.

Q3 - What does this mean to Americans?

Each of the more than 300 million people in America, including those born yesterday, will end up with at least a $100,000 debt hanging over their heads. This is the representative figure that is the accumulation of the current escalation of the national deficit and the new estimated $2 trillion dollar bailout of the financial markets.

The government bailout of the private sector of the market means that each of us was just handed a tax bill or, we might call it a “cash call” because we are collectively the new owners of the private problems of borrows and lenders.

Ron Paul (R, TX) was correct when he told Ben Bernanke, in essence, “you are going to bankrupt the American people with your money policies.”

The average American family is essentially, on paper, wiped out by this move and the impact on the real estate and mortgage industries was just extended to perhap a decade or even more.

Q4 - What does this mean in terms of the election?

This is the easy question and the answer is more finger pointing, more investigations, excessive government snooping (there needs to be some), lots of drama on the political stump and a great deal of harm to John McCain, who is already having difficulty coming out from the shadow of Bush’s foreign and domestic policies.

But it also means trouble for Barack Obama. He can forget about his national health care program for all Americans, he can forget about taxing anyone, much less those earning incomes above $250k and he can kiss his “no-new-energy-if-it-means-drilling-coal fired plants-and-nuclear-power” policy good by.

In essence the damage done to both candidacies is substantial and the next 45 days are going to be like the wild-wild-west as we run up to election time. To vote in the Presidential poll, visit www.iVoteAmerica.com.

The most remarkable thing about today’s move to “take-over” is that it represents a profoundly fundamental shift in our capital market value system and establishes a whole new mechanism for creating a way to further tax the American people. Make no mistake about it, you just got taxed and to pay the tax bill you were forced to financed the payments over time. There was paperwork, no disclosure and no recource for any of us. All of this is taking place right before our eyes without much of a whimper or a voice of protest.

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