Ken777
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Americans’ Wealth Dropped 40 Percent

Mon Jun 11, 2012 7:39 pm

From the WaPo:

Quote:

The net worth of the American family has fallen to its lowest level in two decades, according to government data released Monday, driven by a more than 40 percent drop in their stakes in their homes.

The Federal Reserve’s detailed survey of consumer finances showed families’ median wealth plunged from $126,400 in 2007 to $77,300 in 2010 — a 39 percent decline. That put them on par with median wealth in 1992
.
http://www.washingtonpost.com/busine...6/11/gJQAlIsCVV_story.html?hpid=z1

Another comment in the article:

Quote:

underscore the depth of the wounds of the Great Recession and how far many families remain from healing

Anyone looking for miracle cures today or in the near future will be disappointed.
 
Maverick623
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RE: Americans’ Wealth Dropped 40 Percent

Mon Jun 11, 2012 7:57 pm

You simply cannot trust this article, as it does not contain any useful data, an draws erroneous conclusions.

For example, the Post says that the drop in house prices is mostly responsible, which just doesn't pass the smell test. How many families owned homes in 2007, compared to 2010?

Or, better yet, when a house is foreclosed on, the debt is wiped out. If the home is currently worth, say, $70K, and you owe $180K, and it gets foreclosed: guess what? You're wealth has just been increased because the net gain is $110K.
"PHX is Phoenix, PDX is the other city" -777Way
 
Arrow
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RE: Americans’ Wealth Dropped 40 Percent

Mon Jun 11, 2012 9:42 pm

Quoting Maverick623 (Reply 1):
You simply cannot trust this article, as it does not contain any useful data, an draws erroneous conclusions.

All it does is outline a report from the Federal Reserve. Unless it has reporting errors in it (and maybe it does, I'm not going to go looking for them) what is the issue? And when you say it draws "erroneous conclusions" are you referring to the article's conclusions, or the report's conclusions.

Quoting Maverick623 (Reply 1):
For example, the Post says that the drop in house prices is mostly responsible, which just doesn't pass the smell test. How many families owned homes in 2007, compared to 2010?

Go back and read the article. All it does is document the horrific crash in real estate values and calculate how that impacted net worth of "middle class" Americans -- a significant number of whom own homes. The difference in home ownership between 2007 and 2010 wouldn't likely affect the conclusion. To put it more bluntly -- the value of a home has traditionally been the biggest chunk of any family's net worth. If that value crashes -- as it it did -- then the impact on that family's net worth will be catastrophic -- like mayb e as high as 40%.

Quoting Maverick623 (Reply 1):
Or, better yet, when a house is foreclosed on, the debt is wiped out. If the home is currently worth, say, $70K, and you owe $180K, and it gets foreclosed: guess what? You're wealth has just been increased because the net gain is $110K.

Very funny. The fact that whoever this poor sucker is likely started out the ownership position with a piece of equity (which is the first piece that disappears in a declining market) means he/she lost his/her shirt. You might want to consider this cat's ability to ever finance another home on any terms, once he's been through a foreclosure.

I'm not sure what you point was in all that.

[Edited 2012-06-11 14:45:08]
Never let the facts get in the way of a good story.
 
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casinterest
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RE: Americans’ Wealth Dropped 40 Percent

Mon Jun 11, 2012 9:49 pm

Quoting Maverick623 (Reply 1):
For example, the Post says that the drop in house prices is mostly responsible, which just doesn't pass the smell test. How many families owned homes in 2007, compared to 2010?

Or, better yet, when a house is foreclosed on, the debt is wiped out. If the home is currently worth, say, $70K, and you owe $180K, and it gets foreclosed: guess what? You're wealth has just been increased because the net gain is $110K

the smell test isn't in play here. The issue surrounds net worth, and between 2007 and 2010 there was a massive crash in net worth. Ask all those with underwater mortgages.

However Net Worth does not play into a total picture of the economy, as many folks have homes that they never used as collateral to go on spending sprees in 2003 to 2007, so the drop in net worth means nothing.




Quoting Ken777 (Thread starter):
Anyone looking for miracle cures today or in the near future will be disappointed.

This may or may not be true, but the net worth doc doesn't paint a fully accurate measure as Maverick623 pointed out.

Currently here in Raleigh, NC, builders are going nuts, and the housing market is moving again. Mostly because all the 20-30 somethings that never owned are finally buying because interest rates have made it cheaper to buy than rent.

I think the housing market is coming around. Not as fast and robust as some would like, but it is at least movement.
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Ken777
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RE: Americans’ Wealth Dropped 40 Percent

Mon Jun 11, 2012 9:57 pm

Quoting Maverick623 (Reply 1):
You simply cannot trust this article

I don't think you have to be a rocket scientist to believe this article.

Quoting Maverick623 (Reply 1):
You simply cannot trust this article
http://federalreserve.gov/pubs/bulletin/default.htm

That's the link to the FED.

Quoting Maverick623 (Reply 1):
as it does not contain any useful data,

This is the opening paragraph from that link:

Quote:

The Federal Reserve Board's Survey of Consumer Finances for 2010 provides insights into changes in family income and net worth since the 2007 survey. The survey shows that, over the 2007–10 period, the median value of real (inflation-adjusted) family income before taxes fell 7.7 percent, while mean income fell more sharply, an 11.1 percent decline. Both median and mean net worth decreased even more dramatically than income over this period, though the relative movements in the median and the mean are reversed; the median fell 38.8 percent, and the mean fell 14.7 percent. This article reviews these and other changes in the financial condition of U.S. families, including developments in assets, liabilities, and debt payments.

And there is the PDF link if you really want more.

Quoting Maverick623 (Reply 1):
which just doesn't pass the smell test.

It does. My house is paid off and, at my age, I look at the home in terms of generating cash if I down size. With the value of the house lowered that asset is worth less in my retirement. That is what stinks.

Quoting Maverick623 (Reply 1):
the debt is wiped out

But is it wiped out? If the lender believes you can pay on the loss they can go after you.

Quoting Maverick623 (Reply 1):
You're wealth has just been increased because the net gain is $110K.

And guess what - if they bank doesn't go after that $110K they will issue a 1099 for the full $110K and the IRS will take over collection efforts.
 
DfwRevolution
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 12:20 am

Quoting Ken777 (Reply 4):
It does. My house is paid off and, at my age, I look at the home in terms of generating cash if I down size. With the value of the house lowered that asset is worth less in my retirement. That is what stinks.

It would be great if there were assets that continuously appreciate in value without any risk. That's not life.

Quoting Ken777 (Reply 4):
And guess what - if they bank doesn't go after that $110K they will issue a 1099 for the full $110K and the IRS will take over collection efforts.

The IRS does not perform collection. They tax the forgiven debt as normal income, which for the average American households is a rate of ~15%. In this scenario, that would be a tax settlement of $16.5K. And if the debt was discharged in bankruptcy, it is not taxable at all.
 
prebennorholm
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 2:13 am

Quoting Ken777 (Thread starter):
...wealth plunged from $126,400 in 2007 to $77,300 in 2010 — a 39 percent decline.

Fact is that the difference - $50k more in 2007 - was just vapor money mostly due to vastly overpriced homes. Nobody should hope for such a bubble to come back any time soon.

Sure if you sold your house in 2007, and moved into a tent, then you could have cashed in the $50k. (But the poor guy, who bought your house might have defaulted long time ago).

Vapor money isn't the same as wealth. Only with some luck can an individual convert his vapor money into real wealth, while some other individual(s) suffer identical loss.

A significant part of the 2007-vapor-money was also pension saving invested in overpriced stocks.

Some of it was just plain faulty data. Remember that in 2007 one certain Mr. Madoff was in fact considered solvent!!!
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Ken777
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 2:47 am

Quoting casinterest (Reply 3):
However Net Worth does not play into a total picture of the economy, as many folks have homes that they never used as collateral to go on spending sprees in 2003 to 2007, so the drop in net worth means nothing.

I consider the impact on Net Worth on our house has is very important for long term retirement protection.

Reductions in the valuation of homes isn't new. In the mid-80s home values in oil patch were cut in half for far too many. Cheap oil and the attack on the oil industry during the Reagan Years rally hurt prices.

Deflation then and deflation again during the Bush/Cheney Years.

Quoting dfwrevolution (Reply 5):
It would be great if there were assets that continuously appreciate in value without any risk. That's not life.

Especially during GOP Administrations. For Oil Patch you are talking about the Reagan and Bush II Years.

So, basically over the past third of a century we have had deflation of home values of every other GOP Administration.

Quoting dfwrevolution (Reply 5):
The IRS does not perform collection.

They do perform collection on the income noted in a 1099.

While some may file bankruptcy they are then in a pit for 7 years. The banks can continue to go after them as the last GOP Administration changed the Bk Laws to make the banks happy. That means the banks can keep going after you, even if it is at a reduced rate.

Quoting prebennorholm (Reply 6):
Fact is that the difference - $50k more in 2007 - was just vapor money mostly due to vastly overpriced homes.

It depends on where you bought and the price you paid. Then toss in the ability of the home owner to pay that mortgage.

Not all markets were ripped off by the games the financial sector played during Bush II. And some of those markets are still reasonably stable.

I do see significant future risk, however, with the next GOP Administration who starts cutting spending. That will mean significant job cuts and people who, all of a sudden, cannot pay a reasonable mortgage payment. Payments that previously had been both affordable & responsible.

Quoting prebennorholm (Reply 6):
Vapor money isn't the same as wealth.

The value of traditional real-estate has been pretty solid for many - even if Bush-Cheney failed to maintain a normal market.

We are in our third home (that we "owned") and we experienced reasonable growth in value in all three. But we bought homes we could pay for. Fortunately I wasn't dependent on any intelligent leadership from Bush/Cheney to make my mortgage payments.
 
PPVRA
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 3:15 am

It was all phony wealth to begin with, that's why it's called a bubble. Comparing to 2007 without looking further back at what happened is just picking at data to make a big splash in the news.

As for 1992, the timing is correct - by 1992 Greenspan had already driven the Fed's fund rate extremely (too) low:

"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 3:28 am

Quoting Arrow (Reply 2):
To put it more bluntly -- the value of a home has traditionally been the biggest chunk of any family's net worth. If that value crashes -- as it it did -- then the impact on that family's net worth will be catastrophic -- like mayb e as high as 40%.

If you start the clock in 2007 and stop it in 2010 then one can see that, but to do so is unrealistic.

Quoting prebennorholm (Reply 6):
Fact is that the difference - $50k more in 2007 - was just vapor money mostly due to vastly overpriced homes. Nobody should hope for such a bubble to come back any time soon.

Indeed, the chosen time line was the before and the after of the bubble.

Quoting Ken777 (Reply 7):
I consider the impact on Net Worth on our house has is very important for long term retirement protection.

Then I hope you are considering more than a three year window.

Also one does have to wonder about the long term investment value of a house these days.

For your house to be worth more later in life, the younger people had better be doing well enough to buy it off you at the kind of premium you want.

Personally, in these days of greed, dreadful parenting, dreadful education standards and rampant outsourcing, I have a hard time seeing how that will happen.

But there's not much I can do about it...
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zhiao
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 3:59 am

What does retirement have to do with it? That's only pertinent to people who planned to downsize and pocket the rest. This can still be achieved because all housing prices are lower.
 
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casinterest
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 2:27 pm

Quoting Ken777 (Reply 7):
I consider the impact on Net Worth on our house has is very important for long term retirement protection.

Reductions in the valuation of homes isn't new. In the mid-80s home values in oil patch were cut in half for far too many. Cheap oil and the attack on the oil industry during the Reagan Years rally hurt prices.

Deflation then and deflation again during the Bush/Cheney Years

But your key point is " protection" .
The house is where you are choosing to live, and if you have to sell it or reverse mortgage it for protection, then the net worth affects you. Especially if you are basing it off of the highly inflated 2007 numbers.

For some kids just out of college in the last 5 years, they have no net worth tied up in housing yet. Their introduction into the housing market will help bouy and support the housing market going forward. Will homes appreciate like they did in the past? Probably not. but they still have land, and they still take labor and materials to build and repair. The housing market went through a heavy readjustment, and it was a painful one from 2007 through now. Some areas are starting to recover, others are continuing to suffer. however with the interest rates as low as they are, a lot of the younger renters are starting to move heavily into home/condo purchase.
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windy95
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 2:36 pm

Quoting casinterest (Reply 3):
This may or may not be true, but the net worth doc doesn't paint a fully accurate measure as Maverick623 pointed out.

Currently here in Raleigh, NC, builders are going nuts, and the housing market is moving again. Mostly because all the 20-30 somethings that never owned are finally buying because interest rates have made it cheaper to buy than rent.

I think the housing market is coming around. Not as fast and robust as some would like, but it is at least movement

You also have people who do have the spare cash or purcasing power buying second homes here in Florida. We also have investor's buying homes and renting them out now which is helping find the bottom here. Rental properties are doing very well right now since people are afraid to take the plunge.

Quoting prebennorholm (Reply 6):
Fact is that the difference - $50k more in 2007 - was just vapor money mostly due to vastly overpriced homes. Nobody should hope for such a bubble to come back any time soon.

Correct

Quoting PPVRA (Reply 8):
It was all phony wealth to begin with, that's why it's called a bubble.

Correct

Quoting casinterest (Reply 11):

For some kids just out of college in the last 5 years, they have no net worth tied up in housing yet. Their introduction into the housing market will help bouy and support the housing market going forward

Yes it will

Quoting casinterest (Reply 11):
Will homes appreciate like they did in the past? Probably not.

I hope not. A nice steady pace this time.
 
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 4:07 pm

Quoting zhiao (Reply 10):
What does retirement have to do with it? That's only pertinent to people who planned to downsize and pocket the rest.

And that set of people is pretty large. In times past, it was most of the middle class.

Quoting zhiao (Reply 10):
This can still be achieved because all housing prices are lower.

Not if you lost your home in the GFC. Yes, there are lots of reasons why that happened, but indeed it did happen to many.

Quoting casinterest (Reply 11):
For some kids just out of college in the last 5 years, they have no net worth tied up in housing yet. Their introduction into the housing market will help bouy and support the housing market going forward.

Just heard a report on the way in that Massachusetts housing sales are up for the 15th month in a row, FWIW.

I just closed on my re-fi yesterday. The incredibly low interest rates on 15 year notes made it feasible for me to convert from a 30 year note.
Inspiration, move me brightly!
 
EricR
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 5:31 pm

Quoting Ken777 (Reply 7):
So, basically over the past third of a century we have had deflation of home values of every other GOP Administration.


Please explain why/how you believe the crash in home values is related to the GOP administration.

Before you get into details, let me say that the crash in home values was attributed to loose lending practices by banks AND the banks wager on home values steadily increasing at a rate of about 6% per year indefinitely combined with low default projections on high risk mortgages. The crash had nothing to do with any policy or bill passed by the Bush administration.

Also, please note that the Glass Steagall Act (the act that separated commercial banks from investment activities) was repealed under the Clinton administration in 1999. Had this act not been repealed, banks would not have been allowed to perform risky investment activities that contributed to the crash such as betting on home mortgages & betting on derivatives. The risky bets and loose lending practices ultimately resulted in the financial crash and subsequent bailout of banks such as BofA, JP Morgan, Citigroup, etc.

If you are going to blame this on the GOP, then you have to blame the dot-com bust in 2000 on Clinton, and JP Morgan's recent $5 billion trading loss on Obama.

If you are forming your opinions based on news reports from liberal media outlets such as CNN and MSNBC, then you are being mislead. Unfortunately, CNN and MSNBC are just as biased to the left as FOX is to the right.
 
zhiao
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 7:59 pm

Quoting Revelation (Reply 13):
And that set of people is pretty large. In times past, it was most of the middle class.

But if we were to classify such as "income" it would be very small, even in times past. Only about 4% of the housing stock is sold on avg. 70% of such are people who move to bigger and normally more expensive homes. Do the math, say the avg home value is $200,000: *.04 *.30= $2400 per HH. And of this $2400, at most only half is kept as cash I would say.
 
Mir
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 8:07 pm

Quoting EricR (Reply 14):
Please explain why/how you believe the crash in home values is related to the GOP administration.

The Bush Administration's desire to get as many people as they could into their own home, and policies they enacted to help make it happen, are well-documented. They're not the only party at fault, but they certainly share the blame.

-Mir
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mt99
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 8:16 pm

Quoting PPVRA (Reply 8):
It was all phony wealth to begin with, that's why it's called a bubble.

And Banks lent against that phony wealth - right? What does that say about the banks?
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EricR
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 8:59 pm

Quoting Mir (Reply 16):
The Bush Administration's desire to get as many people as they could into their own home, and policies they enacted to help make it happen, are well-documented. They're not the only party at fault, but they certainly share the blame.


There is nothing wrong with an administration's desire to get as many people in a home as possible. This desire transcends all political parties, it is not associated with one party or the other. Even the Obama administration wants more people to own homes, hence the $7,000 one time buyer credit and all of their plans to keep homeowners in their homes.

The manner in which the banks allowed for this practice, and most importantly - their risky bets on high risk mortgages and crazy assumption that home prices would increase indefinitely at a 6% rate - was the primary driver.

Interestingly enough, the Clinton administration was the administration that started "The National Homeownership Strategy: Partners in the American Dream”. This plan set the foundation that would ultimately set in place the trend to get every family into a home. Below is the link from HUD.

http://www.huduser.org/publications/txt/hdbrf2.txt

You could arguably blame the Bush Administration for continuing this plan, but any administration would have continued this plan because the domino affect had yet to take place. No one could have envisioned the amount of risk the banks would eventually take on. Not only did the banks lend to higher risk borrowers, but they also double downed by assuming they would never default and home prices would always continue to rise.

Let's also not forget the public's role in exacerbating the issue. Everyone wanted to make money and people bought second and third homes in hopes that the appreciation would never stop. When the prices began to drop, these people just walked away from their rental properties, thus accelerating the issue. You did not need a very big income to get a 2nd and 3rd mortgage in those days, so in essence, the average person could get a second home.

It is fascinating to see how so many people in the financial industry were so foolish to make these type of assumptions / decisions. These are basic fundamentals that are taught in undergrad finance, yet everyone ignored them. It is a great case study in human behavior.
 
Ken777
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 9:10 pm

Quoting Revelation (Reply 9):
If you start the clock in 2007 and stop it in 2010 then one can see that, but to do so is unrealistic.

That is the timing because the study is done every 3 years. Next one will be 2010 - 2012, regardless of the economic events in the middle.

Quoting Revelation (Reply 9):
Indeed, the chosen time line was the before and the after of the bubble.

The timeline was not chosen, it was a regular 3 year study/.

Quoting Revelation (Reply 9):
Then I hope you are considering more than a three year window.

1985 - Today, and counting.

Quoting Revelation (Reply 9):
Also one does have to wonder about the long term investment value of a house these days.

Some would prefer to be renters their entire life. Not my cup of tea because with a paid off house I know my monthly cost is insurance + taxes + maintenance.

I also know that if you buy to sell you will be better off. That means paying attention to the location, design, location, space, and location.

Did I mention Location is important?

Quoting Revelation (Reply 9):
For your house to be worth more later in life, the younger people had better be doing well enough to buy it off you at the kind of premium you want

Look around. Kids graduated from university this year in various fields from Finance and Accounting to Engineering, Medicine and Law. Harvard and Stanford will not close down because of a lack of qualified students. Neither will Oklahoma, Texas and LSU.

Quoting Revelation (Reply 9):
I have a hard time seeing how that will happen.

Fortunately we bought in an excellent location. Teachers and plumbers won't be buying the house because the location has pushed the price out of their reach. The neighbors are pretty successful in a wide range of fields.

Quoting zhiao (Reply 10):

What does retirement have to do with it? That's only pertinent to people who planned to downsize and pocket the rest.

Depending on how you use the rooms I own a 3 to 5 bedroom house. I simply don't need that much room any more, nor do I need a half an acre, even in a prime location.

That means I can down size and have additional funds for retirement. I considered that carefully when we bought the house in 1985.

But you don't have to wait for retirement to use the profits on a house. Funds for college for kids is one valid use. Moving to a larger house is another.

Basically it is location and buy to sell.

Quoting casinterest (Reply 11):
But your key point is " protection" .

My house has delivered far more protection than I would have had in renting.

Quoting casinterest (Reply 11):
Especially if you are basing it off of the highly inflated 2007 numbers.

I base it off of 1985 values.

Quoting casinterest (Reply 11):
For some kids just out of college in the last 5 years, they have no net worth tied up in housing yet.

Those kids should be laughing as home values are down and interest rates a WAY down. Clearly a time to drive an old, cheap car and put the money into a down payment.

The only dark cloud I see on the horizon will be a change in the tax laws by the conservatives that kills the interest and proper tax deduction. Look for Willard & Bain to deliver that shaft.

Quoting EricR (Reply 14):
Please explain why/how you believe the crash in home values is related to the GOP administration.

Both happened during strong Republican Administrations. First was oil patch and the second was national.]

Not difficult to understand.

Quoting windy95 (Reply 12):
You also have people who do have the spare cash or purcasing power buying second homes here in Florida.

There you go. The Willard Way. Bain & Buddies will make big money, just like Willard talked about.

Quoting windy95 (Reply 12):
Rental properties are doing very well right now since people are afraid to take the plunge.

And a lot of people will not be able to buy now, or in the future, because their job was destroyed in The Great Recession.

They may get a job that pays less, but their hope for another home is in the pits.

Quoting EricR (Reply 14):
The crash had nothing to do with any policy or bill passed by the Bush administration.

The lack of effective oversight of the markets is one factor for the crash. Bush let his god buddies go wild and Obama was left to work on cleaning up the mess.

Maybe we can add in the Guns & Butter & Cake of the Bush Years. Going to war on the credit card. Stuff like that. Personally I believe that the lack of oversight & enforcement of regulations was the major factor.

Quoting EricR (Reply 14):
Also, please note that the Glass Steagall Act (the act that separated commercial banks from investment activities) was repealed under the Clinton administration in 1999.

The driving force for that repeal was that arrogant guy with a Texas PhD. Bald SOB who was simply wrong. I'll think of his name later - been spending years trying to forget him!

Quoting EricR (Reply 14):
If you are forming your opinions based on news reports from liberal media outlets such as CNN and MSNBC, then you are being mislead.

MSNBC does look left, but they also have some intelligent people.

Dylan Ratigan, former Global Managing Editor for Corporate Finance at Bloomberg, presents some intelligent comments.

Rachel Maddow has a sense of humor, and a brain. I bought her book after seeing it on Steve Schmidt's bookshelf. The gal went to Stanford and Oxford, where she earned a PhD.

Chris Mathews? Just turned him on and Mike Steele & Reagan's son are on. A balanced conversation that would be above Hannity's head.

CNN also has balance - more than MSNBC. There are talking healed from both the right and the left and they are able to have pretty open discussions.

I can tune into any of the above MSNBC shows and be comfortable, just like CNN. I can't take 5 minutes of FOX, or Rush. Haven't tuned into the, in years.
 
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casinterest
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 9:23 pm

Quoting windy95 (Reply 12):
I hope not. A nice steady pace this time.

I expect some minor bumps of wild exhuberance. Some homes are way undervalued.

Quoting Revelation (Reply 13):
Just heard a report on the way in that Massachusetts housing sales are up for the 15th month in a row, FWIW.

I just closed on my re-fi yesterday. The incredibly low interest rates on 15 year notes made it feasible for me to convert from a 30 year note.

I have heard of a lot of folks doing that. The rates on a 30 year are lower than I ever imagined, and it is helping me make a move up .

Quoting Ken777 (Reply 19):
Look around. Kids graduated from university this year in various fields from Finance and Accounting to Engineering, Medicine and Law. Harvard and Stanford will not close down because of a lack of qualified students. Neither will Oklahoma, Texas and LSU.

Of course they did, but you also need Joe the plumber and Larry the Cable guy purchasing as well.
Some of those homes in certain areas got far outside of what blue collar workers could afford.

Quoting Ken777 (Reply 19):
That means I can down size and have additional funds for retirement. I considered that carefully when we bought the house in 1985.

But you don't have to wait for retirement to use the profits on a house. Funds for college for kids is one valid use. Moving to a larger house is another.

I am doing the latter.

Quoting Ken777 (Reply 19):
My house has delivered far more protection than I would have had in renting.

I agree with this, Renting is money tossed away. my Mortgage on a 4 bedroom home will be less than a rent quote I got on a 2 bedroom apartment.

Quoting Ken777 (Reply 19):
I base it off of 1985 values.

Then you are doing fine.

Quoting Ken777 (Reply 19):
Those kids should be laughing as home values are down and interest rates a WAY down. Clearly a time to drive an old, cheap car and put the money into a down payment.

The only dark cloud I see on the horizon will be a change in the tax laws by the conservatives that kills the interest and proper tax deduction. Look for Willard & Bain to deliver that shaft.

They won't deliver a cut on this one. this will be a political hot potatoe that is fun to toss around, but no one will bite without a clear plan forward.
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EricR
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 9:48 pm

Quoting Ken777 (Reply 19):
Texas PhD. Bald SOB who was simply wrong


Tell us how you truly feel about him

Quoting Ken777 (Reply 19):
Quoting EricR (Reply 14):
The crash had nothing to do with any policy or bill passed by the Bush administration.

The lack of effective oversight of the markets is one factor for the crash. Bush let his god buddies go wild and Obama was left to work on cleaning up the mess.


Well, as I mentioned in the reply just prior to your post (you may not have read it in time), the Clinton adminstration layed the foundation of one home for every family. There is a link to the HUD document.

The oversight you say in occurred in the Bush years would have happened under any administration because there had been no indication of issues related to risky bank practices until it was too late.

Administrations (Rep or Dem) do not have that kind of insight until it is often too late hence the reason why I used the dot-com bust and JP Morgan's recent trading loss as examples of other financial issues that occurred under democratic administrations.

Nevertheless, laying blame soly on the GOP is simply not accurate. There were many factors including that caused this calamity including:
1. The risky business practices of financial institutions
2. Repeal of Glass-Steagall
3. Greed of the average person buying multiple houses to make more money and then walking away from these properties when prices collapsed
4. Clinton administration for laying the foundation of one home for every family
5. Continuation of this policy by the Bush Administration

Quoting Ken777 (Reply 19):
MSNBC does look left, but they also have some intelligent people.

Dylan Ratigan, former Global Managing Editor for Corporate Finance at Bloomberg, presents some intelligent comments.

Rachel Maddow has a sense of humor, and a brain. I bought her book after seeing it on Steve Schmidt's bookshelf. The gal went to Stanford and Oxford, where she earned a PhD.

Chris Mathews? Just turned him on and Mike Steele & Reagan's son are on. A balanced conversation that would be above Hannity's head.

I'll agree on Dylan - however - the rest can go the way of the dinosaur.
 
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 10:28 pm

Quoting Ken777 (Reply 19):
Not my cup of tea because with a paid off house I know my monthly cost is insurance + taxes + maintenance.

Indeed, but as you say, some prefer mobility and to let others worry about the maintenance.

Quoting Ken777 (Reply 19):
Look around. Kids graduated from university this year in various fields from Finance and Accounting to Engineering, Medicine and Law. Harvard and Stanford will not close down because of a lack of qualified students. Neither will Oklahoma, Texas and LSU.

If that's who will be buying in your neighborhood, then you are all set, but I don't think that's the rule, it's the exception.

Quoting casinterest (Reply 20):
Quoting Revelation (Reply 13):
I just closed on my re-fi yesterday. The incredibly low interest rates on 15 year notes made it feasible for me to convert from a 30 year note.

I have heard of a lot of folks doing that. The rates on a 30 year are lower than I ever imagined, and it is helping me make a move up .

I'm joining Ken's club - the 15 year mark is about when I can collect social security, presuming it is still there, presuming they haven't jacked up the retirement age to 88.

Quoting EricR (Reply 21):
Greed of the average person buying multiple houses to make more money and then walking away from these properties when prices collapsed

I think that too is the exception rather than the rule.

Surely a lot of that was going on, but clearly not a lot compared to all the folks who simply could not afford their homes (and the rest of their lifestyles) yet were still given mortgages by the banks.
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windy95
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 10:52 pm

Quoting Ken777 (Reply 19):
There you go. The Willard Way. Bain & Buddies will make big money, just like Willard talked about.

No I am talking about middle class people like me who is looking for a second home to eventually retire to. And many of my fellow middle class friends are buying homes and turning them into rental properties in the hopes of being the next Willard or Donald. But nice try though.
 
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RE: Americans’ Wealth Dropped 40 Percent

Tue Jun 12, 2012 11:05 pm

Quoting EricR (Reply 18):
No one could have envisioned the amount of risk the banks would eventually take on.

  

They didn't envision it because they were paid not to.

Quoting casinterest (Reply 20):
Renting is money tossed away.

The only difference between renting and mortgaging is who is responsible for the maintenance work and property taxes.
"PHX is Phoenix, PDX is the other city" -777Way
 
PPVRA
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 12:28 am

Quoting mt99 (Reply 17):
And Banks lent against that phony wealth - right? What does that say about the banks?

It says FANNIE MAE and FREDDIE MAC.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
mt99
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 12:53 am

Quoting PPVRA (Reply 25):

Quoting mt99 (Reply 17):
And Banks lent against that phony wealth - right? What does that say about the banks?

It says FANNIE MAE and FREDDIE MAC.

That does not take any responsibility of what happened away from the banks..
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PPVRA
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 1:05 am

Quoting mt99 (Reply 26):
That does not take any responsibility of what happened away from the banks..

The banks SHARE responsibility with the government for what happened.

With that said, the banks are still merely pawns of the "economic planners" in Washington.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
windy95
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 1:06 am

Quoting mt99 (Reply 26):
That does not take any responsibility of what happened away from the banks..

Or from the people who signed for the loan's.
 
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 2:42 am

Quoting EricR (Reply 18):
Interestingly enough, the Clinton administration was the administration that started

There have been various programs over the years. The 235 program was the big one when I was getting a starter home. And, of course, the GI Bill has delivered a mountain of home ownership over the years. I needed $127 at signing - 3 months worth of property taxes and insurance premiums with the GI Bill.

Quoting EricR (Reply 18):
You could arguably blame the Bush Administration for continuing this plan

Like previous successful plans it is not the plan that is screwed up - it is the games people were playing, ripping off the consumers and the government. The biggest problem we have today, IMO, is that we don't have a lot of the bums in prison.

Quoting casinterest (Reply 20):
but you also need Joe the plumber and Larry the Cable guy purchasing as well.

Have you paid for a plumber to do some work at your house lately?         

Quoting casinterest (Reply 20):
Some of those homes in certain areas got far outside of what blue collar workers could afford

One interesting factor is that, years ago, the blue collar workers had their communities in a reasonably priced area. Then cities expanded out and those workers communities became desirable areas close to central towns. Now many of those areas are very desirable. Subiaco just outside the CBD in PER is a classic example. (My wife actually lived there way back when it was a reasonable rental area.)

Quoting casinterest (Reply 20):
I am doing the latter.

That can work out well over the years. You are basically getting growth from a larger base.

Quoting casinterest (Reply 20):
this will be a political hot potatoe

Oh, Jeez. You just pulled a Dan Quale!         

Quoting EricR (Reply 21):
Tell us how you truly feel about him

I'd be banned for 2 weeks if I did.

Phil Graham, Texas PhD

or is it Phil Graham, Texas, PhD

or does it matter?

Quoting EricR (Reply 21):
I'll agree on Dylan - however - the rest can go the way of the dinosaur.

Just saw that he is leaving the show. Pity as the guy did have a brain when it came to economic issues.

I like Chris Mathews from time to time because the guy loves politics, as opposed to building political hatred.

Quoting windy95 (Reply 23):
No I am talking about middle class people like me who is looking for a second home to eventually retire to.

Reality for us is that a "retirement home" looks pretty good. For health reasons we need to look at homes without stairs. There is also a benefit at looking at current technology homes - especially in the area of energy efficiency. My preference is to look further out at a new home in the same price range, but well designed. (I really like the Jack Arnold designs and some are a reasonable size.) When I drop dead my wife could then sell, move to a smaller size logical for her and use the profits to supplement ongoing retirement income.

Quoting Maverick623 (Reply 24):
The only difference between renting and mortgaging is who is responsible for the maintenance work and property taxes.

Depends on how wise you are in buying. Some areas do increase in price, generating profits for the home owner, even after factoring in insurance, taxes and maintenance.
 
mt99
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 4:11 am

Quoting PPVRA (Reply 27):
With that said, the banks are still merely pawns of the "economic planners" in Washington.

Is that why they get bailed out?

Quoting PPVRA (Reply 27):
The banks SHARE responsibility with the government for what happened.

GWB's government.. right?

Quoting windy95 (Reply 28):
Quoting mt99 (Reply 26):
That does not take any responsibility of what happened away from the banks..

Or from the people who signed for the loan's.

Or the people who misrepresented the loans that they were signing.
Step into my office, baby
 
windy95
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 11:48 am

Quoting mt99 (Reply 30):
Or from the people who signed for the loan's.
Or the people who misrepresented the loans that they were signing.

Or the Realtor's who worked with the lender's, or the Speculator's trying to make it big and of course the borrower who was trying to buy more than they could afford. But all blame still goes to those who signed on the bottom line without doing due diligence.

Quoting mt99 (Reply 30):
Quoting PPVRA (Reply 27):The banks SHARE responsibility with the government for what happened.
GWB's government.. right?

Including all of the Government for the last 20 years. They all had their hand in the Cookie Jar. But there is no one specific person or administration to put the blame on. They collectively screwed us while holding the hand's of Fanny, Freddy an the Bank's
 
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 12:42 pm

Quoting windy95 (Reply 28):
Or from the people who signed for the loan's.
Quoting windy95 (Reply 31):
Or the Realtor's who worked with the lender's, or the Speculator's trying to make it big and of course the borrower who was trying to buy more than they could afford. But all blame still goes to those who signed on the bottom line without doing due diligence.
Quoting windy95 (Reply 31):
Including all of the Government for the last 20 years. They all had their hand in the Cookie Jar. But there is no one specific person or administration to put the blame on. They collectively screwed us while holding the hand's of Fanny, Freddy an the Bank's

IMHO the bulk of the blame goes to the bankers.

They are the ones who have the job of protecting their institutions.

Surely the government has given the banks the tools they needed to create their own ruin, but it is the bankers who chose to use those tools with wild abandon, instead of with a degree of professional analysis as to the impact of their use to their institutions.

The bankers are the ones with the training and the responsibility to protect their institutions by not loaning money to people who can't pay them back, but very few acted like professionals, most all acted like greedy pigs grabbing each quarterly bonus they could, and letting the chips fall where they may.

The bottom line is the bankers chose short term profit over prudence.

There just are people who can't manage money, so prudence would dictate that you not loan them tens or hundreds of thousands of dollars, but there was very little incentive to not give them the money and to collect the bonus.

The sad part is after all of this, they are now fighting every change to regulation tooth and nail.

Of course they love the idea that they can speculate like crazy, pocket the bonuses in real time, and pass the risk on to the consumer and the taxpayer.

The real lesson of JPMorgan's $2B trading loss is that the bank's internal checks and balances are crap. They have very little ability and very little incentive to understand and limit risk.
Inspiration, move me brightly!
 
mt99
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 1:51 pm

Quoting windy95 (Reply 31):
Including all of the Government for the last 20 years. They all had their hand in the Cookie Jar. But there is no one specific person or administration to put the blame on. They collectively screwed us while holding the hand's of Fanny, Freddy an the Bank's

Shh - don't say those things. Everyone know that the as soon as one President takes over EVERYTHING that happens from that moment on is their complete responsibility. I mean, Obama is responsible for the sun going up - did you know that?
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casinterest
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 4:12 pm

Quoting Ken777 (Reply 29):
Oh, Jeez. You just pulled a Dan Quale

I rarely bother with a spell checker  

Not planning to run for office either.

Quoting Ken777 (Reply 29):
Have you paid for a plumber to do some work at your house lately?

Haven't had to yet {Knock on Wood}

Quoting Ken777 (Reply 29):
One interesting factor is that, years ago, the blue collar workers had their communities in a reasonably priced area. Then cities expanded out and those workers communities became desirable areas close to central towns. Now many of those areas are very desirable. Subiaco just outside the CBD in PER is a classic example. (My wife actually lived there way back when it was a reasonable rental area.)

true enough, but the biggest issue I saw in 2005 - 2007 is that a lot of folks were purchasing homes using ARMS and then overleveraging themselves ot the tune of 50% of income to pay the ARM. Too many folks were in the market for homes they could not and should not afford.
Older than I just was ,and younger than I will soo be.
 
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 4:40 pm

Quoting casinterest (Reply 34):

true enough, but the biggest issue I saw in 2005 - 2007 is that a lot of folks were purchasing homes using ARMS and then overleveraging themselves ot the tune of 50% of income to pay the ARM. Too many folks were in the market for homes they could not and should not afford.

As the old joke goes, if you owe the bank $50k you have a problem, if you owe the bank $500k the bank has a problem.
Inspiration, move me brightly!
 
bhill
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 9:49 pm

Brooksley Born Excoriates Alan Greenspan: “You Failed”
By: David Dayen Wednesday April 7, 2010 8:44 am
Tweet232

At today’s Financial Crisis Inquiry Commission hearing, Brooksley Born, the former head of the Commodity Futures Trading Commission, declared Alan Greenspan’s tenure at the Federal Reserve an unmitigated failure – to his face. Greenspan accords a certain degree of respect on Capitol Hill, despite Born’s accurate take on his many failures, and so this outburst was highly unusual – and gratifying.

Born, who pushed to strictly regulate derivatives under the Clinton Administration, but lost the battle to, among other people, Alan Greenspan, told the former Federal Reserve chair that his agency “failed to prevent housing bubble, failed to prevent the predatory lending scandal, failed to prevent the activities that would bring the financial system to the verge of collapse.”

“You failed to prevent many of our banks from consolidating and growing to a size that are now too big or too interconnected to fail,” Born added. She added that Greenspan’s views on deregulation, which he took as an article of faith, contributed to the Federal Reserve’s failure in delivering on its mandate.

Looking as angry as he could at his advanced age, Greenspan replied, “The flaw in the system I acknowledged was an ability to fully understand the state of potential risks that were fully untested… That means we were under-capitalizing the banking system for 40 or 50 years.”

He then pivoted to a defense of his work, using an innocent bystander argument. “I don’t have the discretion to use my own ideology to affect my judgments on what Congress did. If somebody asked my view on a particular subject, I would give it to them. But I ran my office as required by law… I fundamenally disagree with your perspective.”

This is frankly ridiculous. Alan Greenspan was known during his days at the Fed as “The Oracle.” Every word of his moved the markets and moved politicians. His viewpoints absolutely contributed to the deregulation of the financial sector. He also had lots of broad discretion while at the Fed to deal with the housing bubble. Instead he hyped it.

If anyone was watching this but me and the WSJ, they would have seen a cornered rat. Born nailed Greenspan – although, given the relative lack of interest in the FCIC, the benefit to that will be merely psychic in nature."

Right there in a nutshell...see for all of the folks that lost wealth in financial securities..i.e. the "rich", have pretty much made it back, because that is were all of the "rescue" monies from the Fed went. But for the "average" middle class whose wealth was in their home or real estate..bummer, the Fed did not deem that the "rescue" monies should be spent propping up that sector of the economy.....
Carpe Pices
 
PPVRA
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RE: Americans’ Wealth Dropped 40 Percent

Wed Jun 13, 2012 11:29 pm

Quoting mt99 (Reply 30):
GWB's government.. right?

The main economic planners are the Fed, which under Greenspan goes back to 1987. So every government that re-appointed him and every congress that reconfirmed him.

Quoting bhill (Reply 36):
Born nailed Greenspan

For the wrong reasons.

You can regulate an alcoholic all you want but if you don't stop pouring the liquor, he will still die of poisoning. This is what Born gets wrong and this is what the likes of Born actually promote doing.

Frankly, Born is as much a problem as Greenspan, if not worse.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
seb146
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 3:18 am

One issue that was brought up this afternoon on "liberal" talk radio is: FOX "news" is spouting off how this happened over the past three years when, clearly, two of those years (2007, 2008) were under BUSH leadership. Obama did not officially take office until 2009.

But, it is Obama's fault. Even the stuff that happened before he was ever president. Blame the black guy in the White House...
Life in the wall is a drag.
 
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DeltaMD90
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 3:53 am

Quoting seb146 (Reply 38):
Blame the black guy in the White House...

This out of the blue race baiting is totally uncalled for, detracts from the topic at hand, and adds nothing to the conversation! Just as bad as calling President Obama a Soviet! Tired of this flame bait from both sides...
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Mir
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 4:07 am

Quoting EricR (Reply 18):
There is nothing wrong with an administration's desire to get as many people in a home as possible.

Except when they fail to do anything about the prevalence of too-good-to-be-true credit because it would conflict with their own narrative about the economy.

Quoting windy95 (Reply 31):
But all blame still goes to those who signed on the bottom line without doing due diligence.

A category that includes both the lendee and the lender.

-Mir
7 billion, one nation, imagination...it's a beautiful day
 
Ken777
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 4:21 am

Quoting casinterest (Reply 34):
a lot of folks were purchasing homes using ARMS and then overleveraging themselves ot the tune of 50% of income to pay the ARM.

That is where the game was. Promises of inflation to cover the part you couldn't afford so you could refinance to a low fixed interest rate and live happily ever after.

Churn & Turn was the name of the game. It generated huge incomes for a lot of people and there was no way they would cut their incomes.

Asking someone in that Churn & Turn game to stop the games and get strict on lending during that Churn & Turn Boom is like asking a conservative to raise taxes by repealing the Bush Surplus Refund.

Quoting seb146 (Reply 38):
FOX "news" is spouting off

Those 5 words are all you need.   

Quoting DeltaMD90 (Reply 39):
This out of the blue race baiting is totally uncalled for, detracts from the topic at hand, and adds nothing to the conversation!

Sadly there is a large group that hate Obama simply because he is a man of color. I've seen it, as has a lot of people I know.

When you look at Election '12 you can be sure it will be just under the surface in a lot of places, and a lot of SuperPacs.

Quoting Mir (Reply 40):
Except when they fail to do anything about the prevalence of too-good-to-be-true credit because it would conflict with their own narrative about the economy.

That Churn & Turn Bubble was far too profitable for those running the game. It lasted for some time, delivering benefits for some of the home buyers who figured out they needed to sell, take the profits and buy a home they could afford long term.
 
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DeltaMD90
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 1:56 pm

Quoting Ken777 (Reply 41):
Quoting DeltaMD90 (Reply 39):
This out of the blue race baiting is totally uncalled for, detracts from the topic at hand, and adds nothing to the conversation!

Sadly there is a large group that hate Obama simply because he is a man of color. I've seen it, as has a lot of people I know.

His comment has no relevance to the discussion... it's just flamebait. There are plenty of valid points to argue without pulling the race card (since no one here has been insinuating anything about race.) If there is to be a logical discussion about race, maybe it should be in a different thread and presented in a much more mature way...
Ironically I have never flown a Delta MD-90 :)
 
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modernArt
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 4:47 pm

Quoting seb146 (Reply 38):
two of those years (2007, 2008) were under BUSH leadership.

Conveniently forgetting that the Democrats regained control of both the House and Senate after the autumn 2006 elections.
 
Ken777
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 4:52 pm

James Carville has an interesting approach to evaluating the loss of 40% of wealth - this time he considers what would be happening if it was the rich who lost that 40%.

Quote:

What do you think the reaction would be to that?

The elite would call for the suspension of habeas corpus, the government would call out the National Guard, invade Honduras and the Supreme Court would announce that it is in session 24/7 to take any action deemed necessary to help their friends.

The Wall Street Journal would have a black border on the newspaper. The Financial Times would go from pink to gray. CNBC would play funeral music for nine months. Steve Schwarzman would compare it to the H-word. Cable networks would roadblock all coverage.

Minimum wage laws would be suspended, the 40-hour work week would be thrown out, perhaps they would even do away with child labor laws to get productivity up so profits could increase to make up for lost revenue.
http://www.cnn.com/2012/06/14/opinio...-middle-class/index.html?hpt=hp_t2

We know this didn't happen. It is the diminishing middle class that has been taking the hit. The wealthy has rolled right along, pulling in more wealth than ever and they want more tax cuts, less regulations and other sweet deals from the politicians they pay. One just wonders how long this will continue unabated.
 
EricR
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 6:13 pm

Quoting Ken777 (Reply 44):
The wealthy has rolled right along, pulling in more wealth than ever and they want more tax cuts, less regulations and other sweet deals from the politicians they pay. One just wonders how long this will continue unabated.


I tend to disagree with this point of view. The rich cannot make significant gains in wealth without a thriving middle class. Therefore, when I hear that the Republican administration will only look out for the rich and ignore other classes in society just does not make sense other than promoting political propaganda.

If you are a wealthy business owner or wealthy C level executive, how do you expect to increase your wealth without having a thriving economy as a whole?

Also the tax on the rich issue is way overblown. Even if the tax rates were increased on the rich, we would still have a huge annual deficit. Increasing tax on the rich would only reduce the annual deficit by a small amount. This is a case in point where the political system tries to amplify a hot-button issue to evoke emotion rather than focusing on material items to help reduce the deficit. It is a shame because this tactic draws attention and man hours away from big issues that need to be addressed in order to reduce our deficit.
 
zhiao
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RE: Americans’ Wealth Dropped 40 Percent

Thu Jun 14, 2012 7:54 pm

Quoting Ken777 (Reply 44):
We know this didn't happen. It is the diminishing middle class that has been taking the hit. The wealthy has rolled right along, pulling in more wealth than ever and they want more tax cuts, less regulations and other sweet deals from the politicians they pay. One just wonders how long this will continue unabated.

Actually, the rich saw their incomes fall more than the middle class during the recession, because of huge capital losses.

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