It looks like it is time once again for St. Nick to tally up the good and bad for the year. While there are some financial folks who belong on the "nice" list (maybe the billionaires who publicly pledged to make sizable bequests?), there is no doubt that the "naughty" list on Wall Street is always quite a bit longer. (For more holiday related reading, check out Top Holiday Budget Busters.)
Then again, maybe the naughty boys and girls on this list should take some cheer from their inclusion - because of their own actions, commodities like lumps of coal are worth more than they have been in a while!
PIGS
While the European sovereign debt crisis undoubtedly stretches back to 2008 (if not earlier), it really heated up early in 2010. Greece was already something of a basket case, but the news kept getting worse, culminating in an international bailout in early May. Amidst all the worries about whether Greece would single-handedly sink a major bank or two, worries began to bubble up that Spain and Portugal would soon be in similar straits. Although Spain and Portugal seem relatively stable for now, Ireland brings the year to a close with its own prolonged financial difficulties and bailout.
There is no shortage of names that can go down on Santa's black list for this one. National governments lied to each other and their citizens about the state of their economies, and then gorged on cheap external debt to fund public largess. Of course, the banks who bought the debt also bought the lie(s) or assumed that they could pass the buck on to the public in the form of bailouts if things went south. Last and not least, some of the citizens of these countries themselves should earn a spot on the list for protesting and demonstrating against their governments for daring to actually try to put themselves on a paying, solvent basis and cutting some of these debt-fueled freebies. (For more, check out How Countries Deal With Debt.)
Please follow this link for the full piece:
http://financialedge.investopedia.com/financial-edge/1110/Santas-Financial-Naughty-List-For-2010.aspx
Showing posts with label foreclosures. Show all posts
Showing posts with label foreclosures. Show all posts
Tuesday, November 30, 2010
Tuesday, July 6, 2010
Meet Your New Landlord - The Government
Found an interesting little factoid today on the Christian Science Monitor website - that the Federal government (or"gum'mint" as some like to say around here) owns about half of the foreclosed properties in the country. Those properties came to the government via Fannie Mae, Freddie Mac, HUD, and the VA and total a bit over 200K units. That roughly matches the inventory number of houses for sale in May of this year, so it is not a trivial number.
This position leads to all sorts of interesting problems. Certainly foreclosed properties represent a downward pressure on home values (both in their neighborhood and the overall market). By the same token, quickly disposing of them would make bad housing markets (it is fair to assume, I think, that these properties are disproportionately located in hard-hit markets) even worse. And then on top of that you have the whole nativist / Tea Party / "everything Obama does is wrong because he's Obama" crowd likely to go up in arms at the notion of the government being such a large player in the "private housing market" (let's just not even deal with the fact that the government has been deep in the "private" market for decades and that won't change).
What really struck me about this was that it brought back memories of something I recommended a few years back. When I worked for Smith Breeden, I was part of the econ team as things were falling apart in 2008. At that time, as notions like the TARP and TALF were being discussed, I suggested that the government should just selectively buy houses - I called it the "Little Dutch Boy approach" and the idea would be to selectively buy properties here and there to stabilize markets. My colleagues on the economic team, being generally conservative economic types, weren't too impressed.
Lo and behold, the government sorta ended up doing what I was talking about, but in the least effective, most expensive, and generally sloppiest way possible. Gee, what a surprise, right?
There really aren't any easy ways out of this. I expect that the government will eventually decide that it's "not in the business of owning homes" and sell them to banks, probably large banks, at a discount and allow those banks to flip 'em when the property markets get better. In the meantime, they get to continue playing the role of bag-holder for other people's poor underwriting decisions.
This position leads to all sorts of interesting problems. Certainly foreclosed properties represent a downward pressure on home values (both in their neighborhood and the overall market). By the same token, quickly disposing of them would make bad housing markets (it is fair to assume, I think, that these properties are disproportionately located in hard-hit markets) even worse. And then on top of that you have the whole nativist / Tea Party / "everything Obama does is wrong because he's Obama" crowd likely to go up in arms at the notion of the government being such a large player in the "private housing market" (let's just not even deal with the fact that the government has been deep in the "private" market for decades and that won't change).
What really struck me about this was that it brought back memories of something I recommended a few years back. When I worked for Smith Breeden, I was part of the econ team as things were falling apart in 2008. At that time, as notions like the TARP and TALF were being discussed, I suggested that the government should just selectively buy houses - I called it the "Little Dutch Boy approach" and the idea would be to selectively buy properties here and there to stabilize markets. My colleagues on the economic team, being generally conservative economic types, weren't too impressed.
Lo and behold, the government sorta ended up doing what I was talking about, but in the least effective, most expensive, and generally sloppiest way possible. Gee, what a surprise, right?
There really aren't any easy ways out of this. I expect that the government will eventually decide that it's "not in the business of owning homes" and sell them to banks, probably large banks, at a discount and allow those banks to flip 'em when the property markets get better. In the meantime, they get to continue playing the role of bag-holder for other people's poor underwriting decisions.
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