September 5, 2008
U.S. Foreclosure Rates For Prime Loans Continues To Accelerate
According to the latest report from the Mortgage Bankers Association, the pace of new U.S. home foreclosures "increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years."
Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA's chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.
"People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can't sell and they can't afford the higher payments," Brinkmann said in an interview.
Also noted, while the rate of new foreclosures on subprime loans rose from 4.06 percent to 4.7 percent over the past year, the rate of new foreclosures for prime ARMs jumped from 0.58 percent to 1.82 percent and "the share of seriously delinquent prime ARMs was 6.78 percent, rising from 2.02 percent a year ago."
And on that note, we do a quick flashback to 2005: An ARM (And Quite Possibly A Leg).
∙ U.S. Mortgage Foreclosures, Delinquencies Reach Highs [Bloomberg]
∙ An ARM (And Quite Possibly A Leg) [SocketSite]
First Published: September 5, 2008 10:00 AM
Comments from "Plugged In" Readers
Posted by: diemos at September 5, 2008 10:17 AM
Nowadays, I always wonder if any of this (supposed) financial distress will ever work its way down to the city of San Francisco and the Peninsula. Logic would dictate that eventually, payments will rise and some people will have trouble. For example, I know several people who were laid off recently and had moderate difficulty getting work (up to 6 months of effort), both in finance and pharmaceuticals.
And everyone I know who worked at Google (except one person hired in 2007) has quit, sold their stock options and NOT bought a house (they are sitting on their cash and starting new companies for the most part). Some day, eventually, this "has" to impact prices. Or at least, you would assume that it would ...
Posted by: Jimmy (Bitter Renter) at September 5, 2008 10:40 AM
Jimmy (Bitter Renter), most mortgages in San Francisco and the peninsula are not prime, but they are not sub-prime. They're almost all Alt-A loans (option ARM's, no docs, etc.). Most of those don't start resetting and becoming painful until September of 2009 (from the bad vintages).
If things can turn around before then, those on the margins will escape and hopefully learn a lesson. If things don't turn around (and I'm betting they don't), there will be hell to pay.
Posted by: scurvy at September 5, 2008 11:03 AM
There's something I'm not quite getting here. I re-financed 3 years ago (for my house in San Jose), and got a 3/30 ARM at a 4.75% rate (with zero points, and I think I got a rebate to cover the closing costs). The rate is due to adjust November 1st, and they just set the new rate - 5.0%. That extra 1/4% isn't going to break the bank, and is well below the new rate I could have got when I looked to get into a 30-year fixed back in March.
Did I just get lucky and pick up a really good ARM? True it is going to adjust again in 12 months, but the savings I make holding it another year will buy me a few points incase I do decide to re-fi, and looking at the current market, I don't expect treasuries (the rate is based on the weekly 1-year T-bill from the WSJ) to skyrocket in the next year...
Posted by: Chris Tann at September 5, 2008 11:51 AM
Too late. Even if those people could pony up the cash to get out, it's getting harder and harder for any BUYER to get an alt-a loan.
All hemming and hawing aside over a large quarterly loss at Fannie Mae posted Friday — one that, it should be noted, was the result of aggressive reserving for future losses — it’s pretty clear that the GSE now faces the proverbial piper over its foray into Alt-A mortgages in the past few years. Fannie said Friday that it would exit the Alt-A business altogether by the end of the year, as a result.
You have to expect the others writing those loans will follow suit based on the loss ratios turning much higher than expected. No Alt-A = not many SF buyers.
Posted by: tipster at September 5, 2008 11:53 AM
I disagree with you on the impact of interest rate resets. As I've said on here before, interest rate resets would actually be a good thing for many people (including myself). I purchased my home a couple of years ago using an ARM, and my rate would actually drop by over a point if it started indexing today. With Fed rates being so low, an indexed loan will get you a rate in the sub 5% range -- which is obviously quite low. I also don't think my situation is that unique.
As for folks with option ARMs, they will likely have some payment shock from resets, but I don't think Option ARMS are very common in SF...or most places for that matter. BTW, even people with I/O loans would most likely escape with little impact on their payments based on the interest savings. If fed rates go up materially, this is a different story, but I doubt that's going to happen anytime soon.
Posted by: Lance at September 5, 2008 11:57 AM
Even if interest rates stay stable, this Alt-A should still be as much a big deal as sub-prime.
There will be problems imho, as many Alt-As are people who live on irregular income (contractors, free lancers) and those will suffer first in a decelerating economy.
And the further we will advance in time, the steeper the problems, as the ones who got into these loans in 2006-2007 are the ones who paid the most for their purchase, chasing the market up and up and up and lying on their income more and more and more...
This will probably have a sizable impact until 2012-2013 until they clear up the space and the dust settles. Let's hope the other segments of the market will have picked up the slack before that.
Posted by: San FronziScheme at September 5, 2008 1:25 PM
Option ARM's and 3-5 year I/O loans were very common in SF, Pen, and South Bay during the credit bubble. If you workout the numbers the *recast* not the *reset* is where the payment shock happens, anywhere from 1.5x-2.5x the original monthly payment. During the last few years of the bubble the lines between Alt-A and Prime started to blur and pretty soon everything became prime. Recasts on Option ARMS happen when the balance reaches 110-125% of the original loan or 5-years whichever is first. On I/O loans the recast happens in 3, 5, or 10-years depending on the loan.
@ Chris Tann
Is you 3/1 loan Interest-Only or Fully-Amortizing?
Posted by: unearthly at September 5, 2008 1:38 PM
@ unearthly - fully amortizing.
I was considering purchasing in San Francisco early this year, and looked at interest-only. I decided against it, partly becase I'm a cheapskate (it was running 1/4-1/2% more than amortizing), and partly because it looked to me like a great way to over-leverage ones self! :->
Posted by: Chris Tann at September 5, 2008 2:16 PM
Lance, you're assuming that you can still get that product. That is, go from one 5-year ARM to another at a lower or comparable rate. Well, that's not necessarily the case. Most underwriters are no longer offering exotic products or are requiring much larger downpayments. So it's stick with the ARM and eventual higher payments, or plunk more money down on a depreciating asset and try to get a more traditional loan.
Alt-A (pay option ARM's, interest only, and no doc) were *very* popular in this area.
You can try to legitimize it to yourself anyway you want, but I'm a student of history and history says SF is screwed. Nothing is new. Everything that will happen as already happened in the past.
Posted by: scurvy at September 5, 2008 2:22 PM
at this point (for the most part) it's not the interest rate resetting that is causing problems
it seems to be (nationally, not necessarily SF)
1) the fact that the buyers could never really afford the place anyway. They were counting on a refinance to pull money out to help pay the mortgage. the refinance is no longer available, and they can't swing the monthly payments, reset/recast or not.
2) the fact that the buyer can't afford the principal payments on recast. they could only afford interest only.
the worrisome sign with all of the data is that these loans are defaulting BEFORE the reset OR the recast. (as example, the 2006 and 2007 vinatge mortgages have neither recast nor reset, yet they are performing worse than ever before). This means that it's not payment shock causing the defaults nationally.
So far SF is different on this point. the reason is possibly that for the most part people in trouble can still sell their house without being underwater... so they sell but have enough $$$ to pay off the note and commissions. that's not possible in the inland empire as example.
Posted by: ex SF-er at September 5, 2008 3:29 PM
@ scurvy: You keep saying that Alt-A were very popular here. Do you have a link?
According to New York Fed Maps, the # of Alt-A mortgages in California are about 48 of every 1000 housing units, whereas for SF county, it's only about half that.
Posted by: mk92 at September 5, 2008 3:40 PM
There seems to be no actual evidence that Alt-A and option ARMS are going to be a problem in S.F. or the peninsula. The fed chart referenced above suggests they won't be a problem.
Given the state of the economy and the job losses, it is quite possible or even likely that interest rates will stay low for a while. If you're ARM is tied to the one year treasury the reset could be lower than your current mortgage payment. Also, 5 year ARMS are a very common product that are still available.
Posted by: anono at September 5, 2008 4:09 PM
"The fed chart referenced above suggests they won't be a problem." 30% in SJ were option arms, and 80% of them make the minimum payment. Won't be a problem? Riiiiggghhhhtttt.
"Also, 5 year ARMS are a very common product that are still available."
Might be a common product, but now you need 20% down and you have to document *everything*. Someone earning $150K who bought a $1M condo with a 3/1 three years ago at 5% down will need to come up with an extra $150K *and* qualify for $850K based on their income *and* have it appraise for what they paid in, what? 2005, or they'll need to come up with even *more* cash.
Good friggin luck with that!
Not a problem. My A**.
Posted by: tipster at September 5, 2008 4:21 PM
I've never been able to find any reliable data on the scope of the really toxic loans -- neg-am, pick-a-pay, teasers, etc. -- in SF. I've seen this from 2006:
But it certainly is not some verifiable source. Maybe the First American survey that's referenced in the link can be dug up?
Anecdotally, I first got interested in Socketsite about 2 years ago when several associates in my office told me they had recently bought places in SF because they were worried about getting priced out forever, and every one of them had an I/O loan that was either neg-am or had a really low (like 2%) teaser rate (one bought a $1.1M place on a $185,000 income with $0 down!). Seemed like a recipe for disaster to me. None of the four is still here, so I don't know how they worked out.
Posted by: Trip at September 5, 2008 4:22 PM
You're conflating Option ARM with Alt-A. Those two universes intersect but there are many Option-ARM & I/O loans stuck in Prime tranches. IMO using the Fed Map as a guide severely underestimates the problem, especially in a Region where non-conforming loans are the norm. That Fed data is primary based on loans serviced by FRE & FNM.
Posted by: unearthly at September 5, 2008 4:28 PM
I'm sure you all saw that the government has announced it is stepping in to prop up Fannie and Freddie. Expect details next week, if not earlier.
Posted by: Dude at September 5, 2008 4:30 PM
"That Fed data is primary based on loans serviced by FRE & FNM."
I do not believe this is the case at all. If you pull up the spreadsheets underlying the maps, they show an average balance on Alt-A loans in the survey to be ~420K (and the average balance has been in that range since I started looking at newyorkfed back in January). Given that it was only within the last couple of months that FRE & FNM loans could go above 417K, there's no way that the data is primarily based on FRE & FNM loans.
Underlying data: http://www.newyorkfed.org/regional/States_AltA_2008_07.xls
What's your back-up for the assertion that newyorkfed underestimates?
Posted by: mk92 at September 5, 2008 4:58 PM
First, let me say thank you for posting such useful comments (ex-SFer, Tipster, unearthly). Insightful, to be sure.
Re Tipster's comment: "30% in SJ were option arms, and 80% of them make the minimum payment. Won't be a problem? Riiiiggghhhhtttt."
I agree that the NY Fed map does not seem to have the quantitative chops to make the conclusions anono seems to be making, but where do you get the data for SF (as opposed to SJ)?
Does anyone have links or data to--
1. % of option arms, arms for SF proper? or parsed by neighborhoods/zip?
2. when loans are scheduled to "recast?"
Posted by: Squaw at September 5, 2008 5:25 PM
I really don't have a good feel for how to get good info regarding the specifics of mortgage exposure for the "real" SF. (Obviously, the "fake" SF is already getting hit pretty hard.)
But I always go back to basic meta-principles. In bubbles, people act like fools. It happens in every bubble.
I'm certain that people stretched as far as possible given the finacing options available to bid up SF real estate. That's what happens in a mania. As the tide goes out, I am 100% certain that the naked swimmers will be revealed, and they will be all over the place.
All that's just a prologue (and excuse) to post one of the funniest examples of the Darwinian process of "Capital Selection" I've come across in a while, involving a Bay Area professor (East Bay). Even though it's OT (investments were in Reno), it's hilarious anecdotal evidence of just how crazy people became!
"Susan Fallis, a communications professor at Saint Mary's College in Moraga, so far seems to fall into the "get the loans off the books" camp of Wachovia customers. In 2004, she sold the Santa Cruz parking lot her father bought in the 1960s for his mobile home business. She reinvested the approximately $3 million into 20 single-family houses in and around Reno, with a 40 percent down payment on each one.
Sixteen of the loans were Pick-a-Payment mortgages from Wachovia. Because Reno rents dropped as her minimum payments climbed, she is now losing about $7,000 per month. She has asked Wachovia to temporarily lower the interest rate on her loans by less than two percentage points, without asking for any adjustment on the loan principal. The change would enable her to break even, but company representatives have told her allowing it "would require a complete reversal in corporate policy," she said.
If Wachovia doesn't allow any modifications, Fallis expects she will have no choice but to default in the next few months. She said everyone loses in that scenario: Wachovia has to sell 16 homes at a loss, 16 families have to vacate their rental properties and her family loses wealth accrued over more than a generation.
"It's absolutely insane," she said. "I'm about ready to become the Cindy Sheehan of real estate; this is just making me so angry."
Posted by: Satchel at September 5, 2008 5:50 PM
The leverage giveth,
the leverage taketh away.
Blessed be the name of the leverage.
Posted by: diemos at September 5, 2008 6:04 PM
That's what happens when greed trumps reason.
Had she invested her 3Mil in no risk investments, she's be earning a meager 120K/year minus taxes. Boring. Who would accept live on that?
Posted by: San FronziScheme at September 5, 2008 6:10 PM
So the GSEs will be taken over, probably this weekend. Best news I've heard in 5 years.
Some highlights of the rumors:
The plan is expected to involve putting the two companies into the conservatorship of their regulator.
Treasury's plan includes a top-level management shakeup at both companies, according to people familiar with the plans. Daniel H. Mudd, chief executive of Fannie Mae, and Richard Syron, his counterpart at Freddie Mac, are expected to step down from their posts eventually.
On Friday afternoon, Messrs. Syron and Mudd were summoned to a meeting at the offices of the agency. Also attending were Mr. Bernanke and Treasury Secretary Henry Paulson.
The meetings Friday were in part aimed at getting Messrs. Mudd and Syron [Tipster comment: these are the heads of the GSEs FM&FM] to agree to the plan, though their approval was not necessary, these people said [Tipster comment: translation: F*CK you if you don't want to go along -- we're taking you over -- whether you like it or not. Obviously if it was going to be business as usual after the takeover, they wouldn't be taking them over!]
The plan is expected to result in a suspension of dividends for owners of preferred stock in the two companies and wipe out common shareholders.
Posted by: tipster at September 5, 2008 7:28 PM
"On Friday afternoon, Messrs. Syron and Mudd were summoned to a meeting at the offices of the agency. Also attending were Mr. Bernanke and Treasury Secretary Henry Paulson."
And Paulson shouted "Your name is mud!!", :-)
Sorry, couldn't resist....
Posted by: pica1986 at September 5, 2008 8:18 PM
If I were Paulson, I'd wait for the market to open and watch the stock price evaporate, THEN I'd announce the takeover.
No sense in taking the blame for all 10 BILLION dollars in equity having vanished into thin air, or "money heaven" as Satchel likes to say.
Wait for the market to do its thing, then announce the government takeover of the last $0.50 in shareholder equity and leave the lawsuits behind.
Posted by: tipster at September 5, 2008 10:00 PM
The Fannie/Freddie bailout should be pretty humorous to watch. Lots of hand-wringing, vows that "we can't let this happen again", etc.
The American Sheeple of course will be cowed into non-action, desperately fearful that anything economically sensible - like the complete elimination of all government support for housing - would wipe out the "wealth" most people think they have.
Once Fannie and Freddie are safely under government conservatorship, their finances will completely disappear through the looking glass, and the sheele won't even notice the ongoing budget line item that is being siphoned from their tax dollars year after year to plug the losses from this monumental folly undertaken by FDR 70 years ago.
Watch the golden parachutes for the fraudsters - not that there is a thing any of us can do about it. And I wouldn't be surprised to see Morgan Stanley and/or Goldman Sachs acting as "advisers" to the "conservators". I mean, now tha the debt ponzi scheme is starting to unravel, we've got to figure out how to replace the poor banksters' faltering income streams, and what could be better than direct USG payments? After all, the system "requires" it (ah, that wonderful term that frightens the sheeple so, "systemic risk"....)
Posted by: Satchel at September 5, 2008 10:48 PM
Great points, Satchel. So we can add Bill Gross and PIMCO to the list of those being bailed out by Paulson. I'm sure you are right that Goldman Sachs will find a way to profit from all of this. We're not going to get Ron Paul - but maybe the Palin administration will do the right thing.
Posted by: FSBO at September 6, 2008 2:47 AM
I'm on call so I'm in a pissy mood tonight as I wait for lab results to come back.
Fannie and Freddie were obviously going to go under and be taken over by the government. This was the easiest call of all time, for at least 2 years. Their balance sheets have been in shambles for well nearing a decade, and then once the Govt started messing with them to bail out the rest of Wall Street it was a given. Hank Paulson's "bazooka" line was the icing of the cake. (he needed congressional approval to do this... once he got it you know the plan was set in motion).
How many people applauded raising conforming limits earlier in the year? Those were the ones voting to pay for overpriced housing with their tax dollars. Nobody has the details on this yet, but this takeover will be assured to cost taxpayers uncountable billions of dollars, and maybe even Trillions. Think about it. A TRILLION dollars. If you really think about it you can't even imagine that kind of money!
But the worst part of it? Fannie and Freddie will take the fall, and they were used to bail out the Investment and Commercial Banks and Foreign investors. SO this taxpayer money won't be spent to help people stay in houses. It will be spent to keep the bonuses rolling for the CEOs of Goldman Sachs and Washington Mutual.
As for the foreigners. we are a poor country in debt up to our eyeballs. we have no choice but to secure the foreign debt, because they are paying for our lifestyle. watch as more and more they become our masters. record deficits DO matter, despite Dick Cheney's infamous line to the contrary.
By the way, this inevitable fall leads to one small area where Satchel and I have disagreed. He felt that Treasuries may be a good investment, and that going forward yield on treasuries might drop. I feel that this will push yield on future Treasuries up.
The Federal Government is spending so much money that they're needing to sell more and more and more Treasuries. As the addage goes; the more supply there is the lower the price will be. The lower the price, the higher the yield. Thus, look for Treasury yields to move up in the more distant future.
Make no mistake, the Federal government for the first time is showing cracks that it could default on it's obligations. Something will have to give. The government has been very good at making lots of promises, and shunting payment to the future. However there is only so much debt that even the govt can take on.
soon we will need to decide between medicines for the elderly, or paying for Million Dollar Condos. we've always needed to make that decision... but soon we'll actually have to choose.
lastly: this won't be good for the other big banks in trouble. How many more banks can the government/Fed take over? how much ammo is left?
don't get me wrong: the deal will be announced before asian markets trade on Sunday (instead of letting each company's share price go to zero as it should), and the markets will surge and bank stocks will surge on the 'good' news. (what's not to like... the American Taxpayer will pay Wall Streets bonuses! hooray!). but then reality will strike when people realize that there may not be $$$ to take over Lehman or WaMu or countless other needed bailouts.
I will short the next rally like crazy. (unless the government makes it illegal to short).
on a side note: only G-D knows what will happen to mortgage rates now. It will be a government program so mortgage rates will be basically priced based on political whim. so starting now anybody saying they know what future mortgage rates will be is talking out of their butt. it would be easier to predict what the future Medicare copayment will be for hearing aids.
Posted by: ex SF-er at September 6, 2008 2:51 AM
"but maybe the Palin administration will do the right thing"
I really like that woman! I'm no McCain fan on policy, that's for sure, but anyone whose grandfather was standing right there next to MacArthur on the Missouri in Tokyo Bay 63 years ago this month meets my character test!
It's pretty funny all the talk about her lack of experience (what a joke - as if Obama has ANY experience, other than political calculation?). I actually could care less. It recalls the famous Bill Buckley quote that I 100% agree with:
"I'd rather be governed by the first 2000 names in the Boston phone book than by the entire Harvard faculty" [various numbers of names are attributed in different sources]
I saw a really funny variant vis a vis Comrade Obama:
"I would rather be governed by the first 500 names in the Wasilla, AK phone book than by the editors of The Harvard Law Review."
Anyway, I hope you're right FSBO.
(BTW, having attended Yale Law School just a couple of years after Obama attended Harvard, I can attest to the wisdom of that assertion. And no, I haven't been to Wasilla, but it would be impossible to assemble a more foolish governing group than the editorial board of an elite law school journal - and I WAS an editor at Yale! ah, the mistakes of youth...)
Posted by: Satchel at September 6, 2008 6:21 AM
"By the way, this inevitable fall leads to one small area where Satchel and I have disagreed. He felt that Treasuries may be a good investment, and that going forward yield on treasuries might drop. I feel that this will push yield on future Treasuries up."
You and I don't disagree in substance, only on timing. Keep the faith on treasuries and the US dollar! At some point in the future, the dollar will be hyperinflated (again), but that's only after enough money/credit is destroyed in the coming (I should start saying, "continuing", but it will get much worse) credit/money bonfire. My guess is another 2-4 years, but it actually could be as long as 10 years, in which USG debt will be a very good bet.
Here's the only intuitions you need IMO, the same ones that worked in Japan in the 90s (and US in the 1930s BTW).
In our system, there is no analytic distinction between money and credit. Zero. (Even in the 1930s, this was true, despite the ostensible backing of dollars by gold).
As credit (money) is destroyed, the remaining money is more scarce, and hence more valuable. Treasuries, as the safest debt, is the safest money. The value of gold (another form of money)as well should hold up, in real terms (say, measured by the cost of houses), but it may struggle a little against dollars.
The USG and the Fed do not care one bit about the American Sheeple. Not one bit. Except of course, they fear pitchforks and a revolution. The dumbing down of America through public education has assured a population that doesn't care about liberty, so the Fed and USG correctly believe they have wide lattitude to whipsaw the population out of its wealth.
The household sector is deep in debt. The Fed and the USG have control over the money supply. Until things get bad - and I mean REALLY bad - why would they confer the wonderful gift of inflation on the indebted population? Wouldn't it be better to wait until as much "wealth" (ie, labor) as possible is siphoned off from the population before embarking on a path of rewarding the ostensible holders of real assets?
Posted by: Satchel at September 6, 2008 7:12 AM
palin? freaking palin? really? give me a break.
she is tough for sure but completely ignorant. i grew up around evangelical christians and i can tell you bottom line she is ignorant as all hell.
try to talk economics with her and i'll bet she starts quoting the old testament. that is what these people do, they argue with the bible and call it fact. disgusting.
i don't want the gov to bail out homeowners or the banks or the lenders or anyone else for that matter. but palin?
i don't want the government in my business and i absolutely don't want god AND the government in my business.
i don't care about her experience, i care that she is an evangelical book-burning creationism believing bible thumping war monger.
if there is a god may she protect us all from these evangelical politicians.
Posted by: waiting for the bottom at September 6, 2008 12:35 PM
Satchel, If Palin meets the "character test", why are they not letting her answer questions from the press? The campaign spokesperson has now proclaimed that she will not give ANY interviews (accept for Christian T.V. and perhaps FOX) for the next couple of weeks. Haven't we had enough of political leaders who "we would want to have a beer with"? I want leadership that is not afraid to be educated, is willing to address real problems with this economy, and does not use religion and the bible for answers to the many many problems this country now faces.
Posted by: anonconfused at September 6, 2008 7:17 PM
I wasn't so clar in my writing. McCain (not Palin) passes the character test to me, because his grandfather was on the USS Missouri that great day 63 years ago. Palin does, too, but for different reasons that aren't really important. As to why should she be released to the press, I'm sure whe will be, but even if she won't, who cares? The press is in the tank of course for Obama, and practically every reporter is an absolute fool with little understanding of what makes America what it is, and what has made it successful historically. They'll just muck it up with their soundbites anyway.
@ waiting fo the bottom - I recognize that some people fear instinctively the "religious right". Believe me, I'm no devout evangelical (but I do believe in God), but I nevertheless recognize the central role that institutions like organized religion and traditional family structures play in a system of ordered liberty that seeks to minimize the role of a (coercive) state.
Ask yourself these questions, "which institutions are there to help me resist the encroachment of the state into my liberty, if churches and family structures are weakened/destroyed?"; if my rights come from "government", rather than God, can't government legitimately just take them away?
In the end, I subscribe to the view that I would rather risk increased political power of the religious than grant it to those who seek to create "heaven" in this world, and who will do it without any fear or belief that they will be held to account in the next (because they are atheists).
In addition, of course, I share the same views as the overwhelming majority of the Founders, who strongly believed that in the absence of religion (and morality, which they believed flowed from religious belief), a limited government would not be possible.
John Adams put it best (and for people who think the First Amendment meant separation of church and state, remember that Adams was THERE at the drafting):
"...we have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge, or gallantry, would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other."
I also subscribe to the view of probably the most astute observer of the genius of the American experiment, de Toqueville:
"Not until I went into the churches of America and heard her pulpits aflame with righteousness did I understand the greatness and the genius of America . . . America is good. And if America ever ceases to be good, America will cease to be great."
I guess I'm a reactionary dinosaur, but hopefully these quotes will stir some comments and maybe even somehow link back into the idea of just how far we have moved from this conception of "limited government" to the situation today where the USG is going to steal the collective wealth of the population to reward its sycophants.
Posted by: Satchel at September 6, 2008 8:06 PM
"...which institutions are there to help me resist the encroachment of the state into my liberty, if churches and family structures are weakened/destroyed?"
" if my rights come from "government", rather than God, can't government legitimately just take them away?"
Haha thats dumb, Im sure your God could take it away even faster.
Posted by: Sick and tired of this nonsense at September 6, 2008 10:18 PM
Thank you, Satchel, for some perspective regarding evangelicals and religion more generally. The canard about evangelicals being "book-burning creationism believing bible thumping war mongers" should have run its course years ago. It remains unclear to me how generally decent, job-having, tax-paying, community-building folk like most of the evangelical community have become equivalent to an untouchable caste among intelligentsia.
Posted by: Mark Stapp at September 7, 2008 10:22 AM
"I wasn't so clar in my writing. McCain (not Palin) passes the character test to me, because his grandfather was on the USS Missouri that great day 63 years ago. "
That's the dumbest thing anyone has ever said in the history of the known universe.
Posted by: anon at September 7, 2008 11:10 AM
"The canard about evangelicals being "book-burning creationism believing bible thumping war mongers" should have run its course years ago."
Perhaps it would have run its course were it were a canard, rather than the truth.
Palin, for example, as mayor, tried to fire Wasilla's librarian for not banning books she found distasteful. Palin believes creationism should be taught alongside evolution in school science class. And Palin believes that we are on a mission from God in Iraq.
Posted by: Dan at September 7, 2008 12:44 PM
satchel and mark
religion and morality have little to do with each other. many religious people are moral kind people and many are horribly depraved, same goes for people who are not religious. morality is diverse, takes many forms, and comes from many places, not just religion. morality does not belong to the religious and i personally greatly resent that idea.
people do not need to fear being accountable in an afterlife to make a better nation through government or through work in communities. i prefer a government that seeks to create a better america because that government is accountable to people and people of future generations, not a judgement that comes after death.
i do not fear the religious right, i only fear the religious right placing their belief in a literal translation of the bible in government. from my perspective it is the religious right that seeks to create a more coercive state. evangelicals wish to push their narrow ideas of morality on all americans, and if you do not see this, you are delusional.
i do not deny the role churches play in protecting liberties in this country and the important role churches play in our communities. most specifically i think of the role churches played in the civil rights movement in the south. i do however believe this role is effective in and from communities not in and from the government.
i do not believe the religious right seeks to protect rights and liberties. i believe they seek to create a nation that is evangelical and ruled by evangelical biblical law. evangelicals believe in a literal translation of the bible. they believe their way and beliefs are the one and only right way and everyone else is wrong. the evangelical world is extreamly black and white. this is the nature of being evangelical. the world is not that simple and this thinking has no place in government.
do you want your children taught all humans come from adam and eve and anyone who believes in evolution is wrong, evil, and is going directly to hell? given the chance, evangelicals would have their singular narrow beliefs placed on americans in all places in society. again, this is the nature of being evangelical. this is why evangelicals are evangelicals and not simply christians. evangelicals are a specific extreme brand of christianity and their force in not to be taken lightly.
i do believe evangelicals have the right to use tax money for their own schools in communities where they can teach all their twisted beliefs till the cows come home. i don't believe they have a right to push those ideas on all children in all public schools.
i was raised evangelical, my family (with the exception of my mother who later in life broke away from the right wing church) is evangelical, and i, in many ways, feel more comfortable four-wheelin with my evangelical cousins than i do in a room of san francisco liberals, this being said, i stand by my statement that sara palin and evangelicals are generally book-burning creationism believing bible thumping war mongers, which is a fine thing to be, i just feel it has no place in government.
Posted by: waiting for the bottom at September 7, 2008 12:55 PM
Those are good and thoughtful points, waiting for the bottom, though I disagree on many of them.
One thing we'd probably agree on is that it will be an interesting election, and one that will tell us a lot about where the American people actually are. Given the state of the economy and personal unpopularity of Bush & Co., it's still Obama's to lose IMO, but the depth of Democratic miscalculation here (or, from the oether side, the brilliance of McCain's strategists) is stunning. America is a center-right country, and an unalloyed Marxist/liberal ticket is a HUGE risk (but now is the time to try it, I guess).
Palin puts the abortion debate front and center, and I for one believe the consensus of the country is FAR to the right of where Obama & Co. are.
In addition, the knee jerk reaction of the left to Palin being a Pentacostal and a memeber of the Assemblies of God should reignite the "religion" debate. After the Rev. Wright stuff broke, Obama went on to lose more than 50% of the remaining primaries, ending on a pretty weak and disjointed note. And the country never got a straight answer as to whether Obama was raised as a Muslim for much of his early life, in consonance with how he was registered at his various primary schools, even though Obama has insisted he's "always" been a Christian. The right is certainly going to welcome this "religion" debate again, and the media will not be able to help themselves, as they always misjudge where the broad consensus of the American people is on questions of religion. To paraphrase Al Pacino in Godfather III, Obama must be thinking now, "Just when I thought I was out, they pull me back in."
A while ago, I came across a really good short essay that ties these questions of religion, limited government, and the eventual bankruptcy of the USG as it seeks to backstop an unsustainable standard of living (as in the Fannie/Freddie/FHLB "bailout"). It is NOT very well written, and it is difficult to read in this format, but it is really very profound IMO, and REALLY worth puzzling through and trying to follow:
Posted by: Satchel at September 7, 2008 3:02 PM
Diemos & tipster
Well, we are really going down the same path as in the 1930s, and the one taken by Japan in the 1990s. I do not think this latest "solution" is going to work any better than any of the others, meaning not at all. Clearly, the USG is penned in by the foreign central banks, and it's worth noting (again) that the Fed refuses to "print" money, instead "wisely" opting to protect its friends (the "system" requires it, after all) and stuff the losses onto the taxpayer. This should be a nice strong headwind for the US e-CON-omy for the foreseeble future. I don't think this is a very market-friendly "solution".
It looks to me like another step in a moderated deflation of assets, for which Bernanke was brought in to accomplish, with TPTB intent on stuffing the losses onto the population wherever possible. Here's what I wrote back in January, and it still seems true today:
"If the declines are rapid, many people will throw the keys on the roof, leaving the banking system in shambles with enormous (likely fatal) losses. To get some idea of the magnitude of the problem, consider that Fannie Mae "insures" something like $2.5 TRILLION of loans on a capital base of $40 BILLION. Thus, the game will be to have the homeowners absorb as much of the coming decline as possible. Towards this end, endless bailout hopes will be stoked, as will fears of future inflation. All this (it is hoped) will have the effect of keeping people paying on depreciating assets from which they would be better of walking away.
It is cynical, but even a small amount of perceived "equity" in a home will keep the homeowner paying a ridiculously large portion of his income (which is after all, the only source of wealth for most people) for a long, long time....
Posted by: Satchel at January 8, 2008 12:16 PM"
HOWEVER, I will change my mind if diemos is right that 100% financing loans become available from the USG at near treasury rates, with loose qualification requirements. If that happens, I will IMMEDIATELY buy a few properties (maybe more than a few) and flip the coin. After all, "heads I win, tails you lose"!
Posted by: Satchel at September 7, 2008 3:18 PM
Dan and Waiting for the Bottom,
The religion issues are a far cry from real estate talk, but always interesting.
It's noteworthy that both of you claim significant exposure to evangelical backgrounds--I myself was raised evangelical. Maybe evangelicals have their own version of what afflicts "recovering Catholics" who sneer at the Pope for decades after they leave the church.
I know from experience that evangelicals are no more moral (or well-educated) than others. I am just surprised at the great powers for social destruction accorded to them in certain circles. With all the wackiness to chose from in the US--a country that from its beginning has woven a tapestry of bizarre philosophies--why does the left fixate on evangelicals? 50 years ago the ideas that abortion should be illegal and that God created the earth would have illicited a yawn from 80% of the nation, along with suprise that anyone should think differently. And yet the nation survived! Now the idea that 20% of the electorate should tell pollsters they have these beliefs signals a full roll-back of the Enlightenment.
Let's examine some of the other cultural influences that slip by under the radar, comparatively speaking. The biggest problems in the US today aren't exactly a shortage of abortion providers or lack of intellectual rigor with regard to esoteric ontological issues. They are more along the lines of illiterate children shooting each other and crumbling civic infrastructure. In these areas, evangelicals seem to be more of a help than a hindrance--so why speak of them with such dismissiveness?
(Besides, I am always confused about whether I am to worry more about stupid rednecks clinging to their guns and bible-thumping religion, the warmongering Jewish neo-cons, or the Catholic Supreme Court cabal.)
To bring this back to real estate, if forced to choose between a guy in Dockers and a golf shirt from Wal-Mart telling me to get right with the Lord before Hell swallows me and a guy telling me to pay $1000/sqft for a SoMa condo, I will buddy up with the religious nut job every time. Yeah, he's wacky, but the other guy is insane.
Posted by: Mark at September 7, 2008 5:06 PM
Only $950/sqft, but I think it looks kinda nice...
You guys paint a bleak picture. I thought all I had to worried about was this comedy/farce called "the next election" (is it a huge practical joke, or is it theleadup to a future-shock disaster movie?). I keep expecting Ashton Kutcher to pop up and admit to punkin' the whole country... Now I have to worry about the economy too. I must dust off "The Culture of Fear" and give it a read, its been recommended to me a couple of times...
Has anyone discussed the similarities between margin trading prior to the Great D, and the current sub-prime/alt-A crisis? The two seem to have a lot in common to me, most notably, investing borrowed money...
Posted by: Chris Tann at September 7, 2008 9:35 PM
Has anyone discussed the similarities between margin trading prior to the Great D
not much on SS, but this analogy is oft used on the financial blogs. Leverage really can goose earnings/returns in an up market, and it can be devastating in a down one.
we had massive leverage in housing from 1997-2007. We must now deleverage. The govt and other agencies are doing their best to sustain current housing prices... I'm not sure if it can be done. If it is done, it will need to come at the expense of something else.
as I said above, we can have expensive RE, but we'll have to give up something very dear to us (health care for elderly? social security? competitiveness in the global marketplace? who knows?). we'll have to choose.
Just like most of us real folk. we can choose to EITHER by expensive cars, OR retire early, but not both.
which will it be?
(FWIW: this leverage was seen everywhere, not just housing. we saw it in the commodities markets, the credit markets, and so on)
Posted by: ex SF-er at September 8, 2008 5:21 AM
For the sake of continuity, we've moved the Fannie/Freddie post-takeover comments to: It’s The End Of The GSE’s As You Know Them (Do You Feel Fine?)
Posted by: SocketSite at September 8, 2008 8:51 AM
Satchel- I always enjoy your commentary, but do you really have to stoop to "sheeple"? Really, this kind of verbiage undermines your otherwise well reasoned arguments and tints you with a shade of foil-hat clad conspiracy theorist.
Posted by: PostDoc at September 8, 2008 9:18 AM
"To bring this back to real estate, if forced to choose between a guy in Dockers and a golf shirt from Wal-Mart telling me to get right with the Lord before Hell swallows me and a guy telling me to pay $1000/sqft for a SoMa condo, I will buddy up with the religious nut job every time. Yeah, he's wacky, but the other guy is insane."
The difference is that no one is forcing you to pay too much for a SOMA condo, while the religious right wants to enact their apocalyptic vision into our government's domestic and foreign policy. And in helping elect Bush and perhaps his Republican successors, they contributed to the policies that helped create the housing bubble in the first place (not to mention the Republicans' sheer incompetence in governing in so many other regards).
Posted by: Dan at September 8, 2008 10:00 AM