By The Tim on September 11, 2009
Here is your open thread for the weekend beginning Friday September 11th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Posted in Open Thread | Tagged open_thread
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
From RGE Bloggers in part:
“….Nice knowing you both!!!!! Drop you pants AVERAGE JOE AMERICAN!
Fannie Mae, Freddie Mac Struggle A Year After Takeover
Fannie had nearly $171 billion in troubled loans as of June and had set aside $55 billion to cover those losses, while Freddie had nearly $78 billion in troubled loans and reserves of only $25 billion. “It’s much worse than anybody thought,” said Paul Miller, an analyst with FBR Capital Markets.
Barclays Capital predicts the companies will need anywhere from $160 billion to $200 billion out of a potential $400 billion lifeline, which the Obama administration expanded from the original $200 billion set last fall. Most analysts don’t expect the money to be returned anytime soon, if at all.
“What will ultimately end up happening,” said Barclays analyst Ajay Rajadhyaksha, “is that the U.S. taxpayer swallows the bill.”
“We’ve been the mortgage market,” said John Koskinen, Freddie Mac’s chairman. “Without that financing availability, people would not have been able to get a mortgage.”
That takes care of Fannie and Freddie. They’ll be liquidated, with the American people on the hook for all the losses, which will rise into the trillions of dollars. Not that you’ll be told, some sort of bad bank will be initiated to keep the losses hidden for years to come. And since the show must go on, or else Wall Street will turn into a garbage heap, here’s the leading contender to be one of the main successors.
Hide reply Reply to this comment By MM CA on 2009-09-09 11:00:37
But, but… Fannie, Freddie and AIG (and GE) stock has been going up! Surely this couldn’t happen if they weren’t really viable!
Yes, “garbage heap.”
Reply to this comment By Guest on 2009-09-10 00:08:47 …”
The rest of the URL:
http://www.rgemonitor.com/roubini-monitor/257648/roubini_interview_with_financial_times_martin_wolf#readcomments
http://www.techweb.com/article/showArticle?articleID=219700728§ion=News
It’s interesting Geithner credits the Obama administration, since arguably they merely continued and expanded the policies started under Bush.
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In this Time magazine article about Las Vegas, Less Vegas: The Casino Town Bets on a Comeback , a woman real estate agent is featured who specializes in –
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“….short selling in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that’s about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they’ve been living in at half the price they paid for their old house. Then she tells them to stop paying on the mortgage on their old place until the bank becomes so fed up that it’s willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit…….”
“………Sure, short selling damages the sellers credit rating, but they just bought a new house, so they don’t care….”
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Interesting business model, not very ethical, but still very interesting. Ambitious Seattle real estate agent entrepreneurs should take note.
Venture Bank went down today.
So did TBTL. :(
http://www.calculatedriskblog.com/2009/09/bank-failure-92-venture-bank-lacy.html
RE: Jillayne @ 4 –
Interesting news, but couldn’t they spell Lacey right?
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From the FDIC “Failed Bank Information” website -
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Venture Bank, Lacey, WA
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On Friday, September 11, 2009, Venture Bank, Lacey, WA was closed by the Washington Department of Financial Institutions, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed….
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Venture Bank had a “Texas Ratio” of 60 last December, no big surprise that it went down.
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Troubled / Untroubled Banks
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RE: TJ_98370 @ 3 –
I read that she got fired due to her confession in the article.
By Markor @ 7:
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Thanx Markor. It could be fun to follow this story……
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Real estate agent loses job after Time article
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A Las Vegas real estate agent who landed a prominent role in a Time magazine cover story is being scrutinized by Nevada licensing officials because of her comments. She has left her employer and is lying low.
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The story by Joel Stein in the Aug. 24 issue, “Less Vegas,” is a high-spirited and high-altitude view of the troubles facing Las Vegas, which he calls both “our most American city” and “an entire city of John Dillingers.”
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In the story, Brooke Boemio — “a bouncy, sweet, recently remarried 31-year-old mom” — is cast as one of the Dillingers. She helps Stein break into a foreclosed home and brags about helping clients who are underwater on their mortgages buy a second house on the cheap and stop making payments on their first mortgages, pressuring the bank into selling the houses for a loss. Everybody’s doing it, she says in the story. In fact, she said, she did it herself.
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Since the story appeared, Boemio and her employer have, in the words of Coldwell Banker Wardley Real Estate President Jeff Sommers,” parted ways.”
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Sommers said his company has conducted an internal investigation and has been unable to find any cases of Boemio engaging in the behavior described in the story. The buy-and-bail tactics described in the story, he said, are serious allegations and “really just in direct opposition to everything in our policies.”
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In a further statement released online, Sommers said Boemio told him she had been misquoted and misrepresented by Time……
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Without making any allegations / accusations or taking sides, my take on this is that Sommers said what he had to say, now that the situation is under national scrutiny. It does not make the story any less credible IMO. Lawyers are lurking in the shadowy perimeters……….
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Rubbish! There would still be mortgages if the government decided to cease backing real-estate finance tomorrow. However, the mortgages that were available would require bigger down-payments and higher levels of credit worthiness, and higher interest rates.
If the government stopped its meddling, we would see property values correct to where they should be (some 50% or 70% lower than where they are), and then MANY more people would be able to afford the 20% or 30% down-payments that the private market would require.
What this government bureaucrat is really saying is that without tax-payer financing of real-estate people would no longer be able to get loans they couldn’t afford for over-priced properties. I am just stunned at the completely idiotic things people in the financial industry say sometimes, and these are people who are SUPPOSED to understand how the economy works!
Boeing is gone. Will WA. be able to match this?
“ATLANTA (Reuters) – Workers at a Boeing Co plant in South Carolina voted on Thursday to decertify the International Association of Machinists and Aerospace Workers as their union.
Robert Wood, a representative for the machinists, said in an email that 68 voted in favor of union representation, while 200 voted to decertify the union at the Charleston plant that was formerly owned by Vought Aircraft Industries.”
http://www.reuters.com/article/domesticNews/idUSTRE5896ZJ20090910
RE: Scotsman @ 10 – No, to match that we’d have to give our employees lobotomies.
RE: Kary L. Krismer @ 11 –
Like the employees who build the Toyotas, Hondas, Bmws, etc. down there? It’s a brave new world, Kary, and I don’t think your regionalism/racism/yankee-imperialism is going to fly…
They want the jobs, so it’s easy permitting, no unions, lower wages, etc. But WA. does offer pink ponies and an attitude of take-it-or-leave-it in the face of ever stiffer competition from places many never knew existed- until it was too late. Some lessons are learned the hard way at the end of a big stick. This may turn out to be one of those.
Kary, did you know the USA ranks 28th in the world among industrialized nations for internet speed and capacity? Imagine that, the home of Microsoft but essentially locked into the dark ages. But we think we’re the only ones who can build airplanes? Hard rain gonna fall…
http://www.chicagotribune.com/business/chi-tc-biz-tech-broadband-0825-0aug30,0,2465151.story
I’m just saying if your group voluntarily goes from a protected employment status to employment at will, you’re not the brightest group of people in the world.
And yes, I knew about that Internet news. It’s not that amazing that the fastest countries are all countries that are the size of certain states here, making it a bit easier to adopt. And it’s not that amazing given the fact that the providers are probably charging more here than just about anywhere, and couldn’t charge more for faster speeds. Finally, other than HD video, I’m not sure what the need for speed is. We’d be much better off improving the speed of our wireless devices.
RE: Sniglet @ 9 –
This has to do with the stock market. Mortgages need to be churning. These loans are replacing other loans and all will be well for this year and possibly 2010.
In my opinion the hope is that enough suckers will refinance, or purchase at these ridiculously inflated prices before people realize that profits are moving on from housing.
In the next few years politicians will be talking about how affordable housing has gotten.
RE: Sniglet @ 9 – At 51 I’m not old enough to remember all the reasons why home ownership has been so promoted by the government, but I wonder if part of the original reason is so that people could have lower living expenses in their later years? If you rent forever, you know you’re going to be paying rent at 65, 70, 75, etc. (forever). But if you own a home, at some point you should only have to be paying for taxes and maintenance.
The problem is, people under 65 right now don’t tend to do that. They tend to be on a course where they’ll still be paying a mortgage at age 65, 70, 75, etc. And many are on a course where their housing expenses will be greater at age 65 than they were at age 50.
RE: Kary L. Krismer @ 13 –
Unions and I parted ways over the issue of NAFTA. I think trade in North America should be seamless. All the protectionism of American companies is meaningless.
I looked at NAFTA as an opportunity to expand Union influence. Unions, and Union representatives, wanted to do nothing more than negotiate and give away benefits of existing members. Every body wanted to keep the pay checks of Union officials coming in.
Lots of Union officials got sweet heart Washington D.C. assignments where they sold out the membership.
Unions represent labor. Most, if not all, people who oppose labor getting paid a fair, working wage, have never worked a day in thier lives.
The people in the South need and want jobs at any cost. $5 per hour is better than nothing. This is a dodge pure and simple. Having a Union or not having a Union is a game changer no matter where you go.
Boeing needs to pay. Stock holders need to get less. It’s stupid when a stock investor can make more from buying blocks of stock than the guy on the ground assembling the plane.
Large manufacturers need to look at the way they manage and deliver goods more than how many dollars they squeeze out of workers.
RE: TJ_98370 @ 8 – RE: Markor @ 7 –
Several weeks ago on RCG I talked about this problem……(sound of crickets, not surprising to me).
By Kary L. Krismer @ 13:
My thought exactly. Now that they are officially suckers, their wages will plummet.
By Markor @ 18:
That might not happen, and probably won’t for certain reasons. But if someone gets a new supervisor, and that new supervisor takes a dislike to that someone for personally personal reasons, that someone might find themselves without a job due to no fault of their own.
If you have a relatively high paying job and you have 10 or more years into the job, losing it could be devastating. And that’s probably particularly true if you live in an economic backwater.
RE: Markor @ 18 –
Hey, at least they’ll have a job unlike many here in the NW.
Wages will be going down in the US for the vast majority.
“Summers: Unemployment Will Remain ‘Unacceptably High’ for Years”
http://blogs.abcnews.com/politicalpunch/2009/09/summers-unemployment-will-remain-unacceptably-high-for-years.html
Without a tight job market and competition among employers for workers, wages don’t rise. We’re facing rising unemployment, less expensive and in many cases better educated labor abroad, and a government that taxes everything in sight.
By Scotsman @ 20:
My point is that they may not. When voting they should have looked at it from the individual viewpoint. They’re now more likely to lose their job. The area might be more likely to gain jobs, but that means little to the individual who now has a job and loses it.
It will be interesting to see what happens down there. Voight (sp?) was either a failure due to management or employees, or both. Boeing is taking over management, which may or may not improve things (they haven’t been making exactly great decisions lately). Assuming things don’t improve down there, management will now blame the sub-par labor of that region, because of course it’s not management’s fault, right?
RE: David Losh @ 16 –
You’re Right David
When did progressive politics veer from unions with higher wages to overpopulation with collapsed wages?
I’m old fashion liberal and know, if it weren’t for unions [before they sold out to globalism], my wages [all our wages for that matter] would be about half what they are right now.
When/if the UAW and the big three disappear or lose their union wage power [same thing]; we’ll be lucky to buy anyones’ cars in the future [including our own]; hence, kiss all these foreign assembled in USA plants good-bye when/if this happens….its in Japan’s, S. Korea’s, Europe’s, China’s best interest that America develop its own industrial base, so it can buy things again. Debt with no industrial base has a final page or limit….IMO, we’ve reached the final chapter there. A five year old could understand my logic. Its time the new Democrat embrace this kind of thinking too.
On Boeing’s Flight to S Carolina with the 787
We need a working 787 protype first. IMO, that may be a pipe dream and moot point anyway.
RE: softwarengineer @ 24 – I would agree, and note that even assuming it someday flies (which it probably will), Boeing will have to get its subcontractors up to production levels where a second assembly line could be needed. That’s probably not all that likely. I suspect that system will make it difficult to keep one line moving.
RE: David Losh @ 16 –
Unions opposed NAFTA because there were no labor protections. There also weren’t environmental protections.
Sure, there are corrupt union officials. Sure, there are some unions that are in bed with the corporate masters at the expense of the workers. Sure, there are some unions ( machinists, anyone?) who will cut off their nose to spite their face and not understand either their own strength or the econimic strength or wekaness of their employer, but…
The folks on top like nothing better than the folks on the bottom fighting amongst themselves, and the folks on top are masters at promoting that.
People who have good health benefits have unions to thank, even if they aren’t union members. People with good wages have unions to thank, even if they aren’t union members .
Some of you may say that just the way things have evolved internationally would have resulted in higher wages and better working conditions and benefits anyway. I call BS on that. It wouldn’t have happened without unions, and unions are as necessary today as they ever were.
RE: Ira Sacharoff @ 26 –
Unions are the single most important consumer protection that we have. Well paid workers perform better than wage slaves. Collective bargaining brings better performance by securing some of the wayward profits for production.
People hold up the workers who can’t be fired because of union representation as a problem. For every one bad unproductive lay about there are three good workers looking to get them fired to get some one else to cover the slack.
Unions work.
I also see American Unions as an example for other countries. I promoted the idea that American Labor Unions should go into Mexico to organize. There was a fear factor in that Unions didn’t want to lose the fight that would surely be bloody.
I saw an opportunity, my Union brothers saw a problem. I still, and firmly believe that the South benefits the most from migration of workers. In my opinion companies in the South and in cross border towns want the slave labor mentality to keep workers in fear.
American Labor Unions should remember that nothing gets done without a fight, and unless all workers are treated fairly no worker is safe.
By David Losh @ 27:
That’s largely a myth. The companies can still set work rules and employees can be fired for violating those rules.
Back when I worked for UPS there were minimum standards for how many boxes a worker unloaded, loaded and sorted per hour. If for some reason you couldn’t do that, the Teamsters couldn’t protect you.
By Scotsman @ 20:
Compare Idaho, a right-to-work (union-busting) state, to WA. It’s better to have higher unemployment, to some extent, than full employment at minimum wage.
RE: Markor @ 29 – If you look at the right to work states, they’re almost all economic backwaters. AZ, TX, VA and a tiny portion of GA are exceptions.
http://www.nrtw.org/rtws.htm
RE: Kary L. Krismer @ 30 –
Yep. They vote for right-to-work because they’re ignorant, frankly. They freely give up their power for more jobs, but lower wages across the board (eventually).
The president of the parts manufacturers association recanted part of what he said here, but at the time I remember finding this particularly funny, particularly this: “He said Nissan and Honda have encountered difficulties getting new plants up to full production in recent years in Mississippi and Alabama due to an untrained – and often illiterate – workforce. In Alabama, trainers had to use “pictorials” to teach some illiterate workers how to use high-tech plant equipment.”
http://freerepublic.com/focus/f-news/1435920/posts
By Kary L. Krismer @ 30:
Read up: Cum hoc ergo propter hoc
Unintended consequences
RE: Joel @ 33 –
Nice links, Joel.
There have been so many half truths, etc. about unions in this thread I don’t know where to start. I’ve run across research on their effects for thirty years- bottom line is they really haven’t changed the employment landscape all that much. They may have gotten credit for some positive changes and wage increases, but deeper study shows they really follow and respond to economic trends and pressures. It is almost always the greater economic environment, not some innovative union-only policy that brings about change.
Regarding Boeing and a move to the south- it’s coming. The union has been a real thorn in Boeing’s side for many years and surely won’t be missed. And while some may joke about stupid southerners, etc the fact is that one way or another Honda, Toyota, BMW, etc. managed to get them trained and producing desirable cars at a profit. GM and Chrysler, on the other hand, are bankrupt. Ford is barely hanging on. So much for union and northern superiority. If you want to move forward, you’ve got to stick with the reality in front of you, not outdated myths and wishes.
Meranwhile, KD over at the marketticker has a nice new color graph up…
http://market-ticker.org/uploads/KeyCharts/ProportionalDebt.vs.GDP.png
Boeing moving to China? Wow!
http://www.dailyfinance.com/2009/08/31/will-boeing-move-to-beijing/
By Joel @ 33:
It’s the United States of America. In some respects each state is it’s own country. If a state has labor policies that don’t promote investment in capital items (machinery, etc.), they don’t advance, just like third world countries.
Rising labor costs mean businesses try to avoid the cost of labor by making each employee more efficient (invest in machinery, equipment, technology, etc.). That means each employee can produce more and earn more. Basically a bigger pie. If you don’t have the labor policies that make that happen, you remain an economic backwater. People still do things by hand, like in third world countries.
The goal is to have fewer and fewer people do the tasks we do today so that the remaining people can take on other tasks. That increases total production, and total income of society. Just about anything that increases the cost of labor accomplishes that task.
By Scotsman @ 36:
McNerney will probably be unemployed before Boeing develops another airplane.
By Kary L. Krismer @ 37:
What policies do those states have to stifle investment? It seems to me their labor laws are trying to give them a competitive advantage to make up for the historical fact that it used to be difficult to have factories in the south before air conditioning. It takes time for population patterns to move, but the trend is definitely towards the south.
The idea that driving labor costs up helps the economy requires that a region have some other compelling factor to outweigh the additional cost.
An interesting article at http://reason.com/blog/show/136043.html on Norman Borlaug, who was responsible for improving agriculture to avoid the predictions from the 1960’s of mass starvation that some commenters here think is still coming.
RE: jon @ 39 – The policy is to be anti-union, which keeps wages low, which keeps productivity low in those states. You are not going to be an economic powerhouse by having an economy that is based on low wages.
You might be right in that there is a chicken and egg element to it. They need to do something to encourage investment. Doing that by ensuring your citizens don’t make much money just doesn’t seem like the right approach to me.
Oh, and BTW, a state like Idaho or Wyoming probably is not going to do much no matter what. They simply don’t have the attributes you need, like ports. Maybe that will change now that we transport large pieces of things many miles for final assembly, but they do have significant natural disadvantages.
RE: jon @ 39 – BTW, it’s also possible some companies want unions around. It’s a lot easier to deal with one entity than 1,000+. Right to work leaves them in limbo.
I did read the links culminating in the Biner Group Holding Company Conglomerate International Corporation shuttering a plant to show workers who the boss is. Now we have to go to Ohio to shut down the new Biner Group Holding Company Conglomorate Internationalal Corporation.
These really smart lords of our once great country will continue to destroy America for a few grubby dollars.
Really, who’s the enemy here, the workers who are asking for a living wage, or the management who want to sit around and talk about how smart they are?
Hey where’s mukoh?
I just got back from visiting friends in Vancouver, BC, and if these folks are anything to go by, the bubble is alive and well in Canada. Several of my friends have recently purchased homes, and they were lamenting how expensive real estate in the lower mainland is, while salivating at the prospect that their modest homes will appreciate enough to allow them to upgrade in the coming years.
Further, to a person, these Canadian professionals ALL think that the worst is over for the stock market, and were discussing how relieved they were that their accounts have been appreciating substantially again.
I didn’t have the heart to start talking about how I feel that we haven’t even begun to scratch the surface of the depression. I very much doubt that my native countryment (i.e. I hail from Canada originally) will go unscathed as deflation kicks in next year. If anything, the real-estate bubble in British Columbia has been far greater than it ever was in Seattle. Worse, their whole economy is hinged on housing and resources. If those two pillars fall down, look out below…
By Kary L. Krismer @ 40:
Just don’t tell that to the Chinese. I’m sure they used to say the same things about Japan and then Korea. The industrial strength of the LA area also depends on cheap labor. Once the factories are set up to utilize the cheap labor, then it is advantageous for the designers and engineers to move in, and universities also attract facility which improves the quality of the labor pool, at which point they move up the ladder.
Perhaps another reason the South has been slow in developing is that technology made it cheaper for companies to go overseas for even cheaper labor. Now that labor costs have risen in the areas of China and India that have sufficient infrastructure, the South is becoming attractive again.
RE: jon @ 44 –
Any company that is basing profit on cheap labor is delusional. It can happen, but the reality is that labor is not stupid. We want to think that a person who works for a living is stupid. The truth is that in most countries, this one included, the stupid people end up in charge. The really stupid people worry about the cost of labor.
Cheap labor will do just enough to not get fired. If pushed they will look busy and cut every corner they can.
We all want to think that because we went to university that we have some special corner on the intelligence market. Whose the dumbie, the guy with the heart attack at 55 or the guy drinking beer on Saturday afternoon?
Define the good life for me and we’ll see where you fit in.
On the ABC news tonight they were spinning the recession as having been started by the collapse of Lehman Brothers. About the only thing they covered well was where the DJIA was at the time, how low it got, and where it is now. But the female reporter was kinda cute. I guess that’s all that matters in the world of TV news.
RE: jon @ 44 – The value of the dollar may drop enough to make it worth it to make things in the US again. There aren’t many coutries that have workers that are as productive as the US. That and if fuel continues to climb it will be to expensive to ship things the way it is being done now.
RE: David Losh @ 27 – Dave, you obviously don’t know much about unions and the cost of labor associated with it. Thats why Wal Mart is growing in this economy and everyone else is tanking.
RE: mukoh @ 48 – I’m not so sure it is. When you can get a better selection of oil and oil filters at Wal-Mart than you can at your typical auto parts store, I think that says something about the auto parts store. When you can get a better selection of gas grill accessories at Wal-Mart than you can at HD and Lowes, I think that says something about HD and Lowes.
I don’t like shopping at Wal-Mart because it’s a zoo (at least in Renton), but I’ve gone to Shucks too many times when they’re out of 5W-30 Mobil 1 (and I don’t think they even carry 10W-30 Mobil 1 high mileage), but they have plenty of cheap as crap CD players and other crap that has nothing to do with auto parts.
Actually, I believe we are going to see quite the opposite. There is a strong possibility that the US dollar is going to appreciate substantially, and ALL asset prices are going to fall in the coming years. Domestic manufacturing will become viable again as prices (in both assets and labour costs) fall enough to make the USA competitive.
http://bit.ly/YlmXD
RE: Kary L. Krismer @ 49 – I just think Wal Mart is a prime model for a good business. Streamline, cut costs everywhere possible, keep prices as low as you can, high volume. Thus they have kept trucker unions out of cutting into their margins, kept labor unions out of the stores. Their execs share rooms when traveling, and always fly coach. No private jets, no BS.
Last time a union organized in one of the stores, Wal Mart closed the store.
Just from rough look into unions the costs for labor are at least 20% higher then non union labor.
That cuts into my costs when I go to shop for ammo at Wmart. Now I can get boxes of Winchester for $13.99 instead of $19.99. Good deal for me. Thats actually about all I buy at Wal Mart.
RE: mukoh @ 51 – But they’re doing that on everyones’ backs. Although the situation is improving, a large percentage of their employees are still uninsured, so when something happens, it’s the rest of us that pick up the tab. I wonder how much they’re contributing to fight Obama’s healthcare plan?
But as mentioned, I think a lot of it is more than just cost control. They’re a good retailer, meaning they compete in ways besides price.
By Kary L. Krismer @ 52:
What are you talking about? It makes sense that they would be in favor of government-sponsored insurance, because that takes all pressure off of them to provide anything themselves. In fact they have come out in support of Obama’s plans.
RE: The Tim @ 53 – I didn’t realize the penalty for a company not covering their employees was only $750. I’d assumed it was a more realistic number. It probably should be at least $2,400 (200 a month). Where did Obama/Congress come up with that number? That’s a no-brainer to go for the $750.
By Kary L. Krismer @ 54:
Yes, that is why they are proposing the number $750. That would destroy private insurance instantly, and push WalMarts cost onto other employers. The people who own WalMart would not be affected by the collapse of the kind of health insurance that you or I can afford.