Editorial

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.

Gekko was Wrong…Greed is Bad

EDITORIAL

A re-post from iVoteAmerica, dated Monday, September 15, 2008.

In the movie Wall Street, Gordon Gekko proclaimed to shareholders, “Greed is good!” Gordon was wrong. Wall Street was wrong. The real estate and mortgage industries were wrong.

Oh, by the way…Alan Greenspan was wrong too when he proclaimed that subprime lending was “innovative” and “beneficial to consumers.”

Sound economics and the art of lending are predicated upon the borrower’s capacity to service the debt, pay it down over time and deliver return to the lender.

The concept of borrowing without capacity is foreign to all western economies and you won’t find it on any campus in America in Economics 101. Neither you nor many of your friends was ever taught the principle “you can have something for nothing.”

No One Whined about the Flow of Money

From about 2000 through 2005 greed was good to Wall Street and to the real estate and to the mortgage industries. No one whined about the money back then.

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The Anniversary of My Ignorance

Some things just stick in our minds. There are certain tiny memories that implant themselves in our memory banks and take up residency for reasons unknown to us at the time.

Such was the case for me in September, 2005.

That was the month and year that I first noticed the beginning of the waning of the real estate market. Not that I was too concerned, having sold my company in April of the same year. The market reports and online articles that typically flood my computer screen seemed different than those to which I had become accustomed. I noted the change and went on. “Oh well,” I remember thinking, “just a statistical blip…a temporary abnormality.”

Little did I know that this would be the anniversary of my ignorance.

In the Summer of ‘05

In ‘05, the market was ablaze, sales were happening, loans were funding and people were still entering our industry in unprecedented numbers. The gold rush was on!

Within and throughout the real estate industry there was attitude. We were strutting our stuff like peacocks in a 4th of July parade. Companies had shattered their all time sales records. Being a million dollar agent was akin to being in preschooler. We were producing $10 million, $20 million and even $50 million dollar agents, like water from an open spigot. Agents had become accustomed to $100k, $250k and $500k incomes after a couple of years in the business. Most of them spent every cent of it on guess what? Real estate.

But now, looking back, I’m asking myself, was there too much pride, too much self-confidence? Were we shackled by our lack of clear thinking and proper vision?

Were we engaging in ignorance? Were we flirting with a dangerous kind of collective ignorance?

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Obama, McCain and Real Estate

Editorial by Stefan Swanepoel

I would like to share with you the fantastic afternoon I had this last Saturday. My wife and I had the privilege of being invited to the two hour Saddleback Civil Forum with Senator Barack Obama and Senator John McCain. This was the first time these two presidential hopefuls, and expected nominees for the Democratic and Republican Parties, shared a public stage.

Rick Warren, author of “A Purpose Driven Life,” and pastor of our Church, Saddleback in Lake Forest, had organized for Obama and McCain to come and present their views on important issues.

The Atypical Conversation. This was not your usual political debate with read-the-teleprompter canned speeches on pre-approved political questions. No sir. This was about the real stuff – the big subjects – topics we usually do not hear about in a presidential face-off.

On Sundays, Rick is usually dressed up in a Hawaiian shirt, but this Saturday was different – he was in a dress shirt, no tie and suit. Rick himself is an excellent and inspiring speaker but the afternoon wasn’t about him.

During the forum Rick first posted questions to Obama before asking McCain the same set of questions. Topics covered aspects such as personal values, religion, abortion, marriage, education, evil, stem cell research, energy and their respective vision for the United States.

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Real Rescue or Only Bandage?

Can the 2008 Housing Act Stabilize and Turn the Real Estate Cycle Around?

Who would have only 5 years ago expected that we would be staring down such complex and turbulent times in real estate?

Last week, President George Bush signed The American Housing Rescue and Foreclosure Prevention Act of 2008 (the Housing Act) into law. It is the most sweeping housing legislation since the Great Depression. The new Act authorizes the Department of the Treasury to stem the tide of home foreclosures and provide a lifeline to mortgage lenders. With inventory in many large cities sitting at almost a one year level, and foreclosures expected to surpass 6 million by 2012, they have a huge task ahead.

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