Where is the US economy headed?

Foxfyre posted proof, ci. Read it and listen. Trillions of dollars in loans, ci. Do you understand that? Trillions, not billions, or millions, its trillions.

http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/

Gee, loans are usually paid back. Understanding loans is not a problem; your inability to understand finance is.

Are bad loans usually paid back CI? I thought there was an issue about sub-prime mortgages in the news sometime in the last year or so. I could have sworn I heard something about banks giving loans to people who shouldn't have qualified for them. Gosh, I know that stuff is around here somewhere.

There was! However, a recent article in the paper explained that most of the toxic loans were not home mortgages but commercial property loans.

Even a tv show this morning was explaining that NYCs commerical property rents were dropping at some phenomenal rates. I know for a fact that there are many business properties in Silicon Valley that goes empty today. I believe that's a problem all across the country.

Many who are paying mortgages above the value of their homes seems to be sticking it out for now. When commerical property is empty, and the business climate is what it is today, they have no potential leasers. People still have to have a place to stay.

Makes sense to me!

The issue of bad loans being paid back is a good question; the obvious conclusion now is that even though bad loans occur even in good times, it's a matter of degree. There are pockets all over the US where home values have dropped more than others; when they will regain some value is anybody's guess, but it's my understanding that home building has somewhat stablized, and dropping less - and some even building more housing units.

Where have you been? This whole debacle has involved the rise in defaults on loans, repossessions, and so forth, which has impacted not only the prices on those homes, but all properties, especially in the hardest hit areas, states, counties, neighborhoods, and so forth. It has had a domino effect, and it has not only impacted owners that live in these properties, but perhaps more importantly it has impacted the behavior of investors. Investors have no emotional stake in property, so if their loans are worth much more than the properties, they simply walk away. As more of this happens, the domino effect drives down the prices even further for other owners. Alot of the problem derives from the fact that many properties were fully leveraged, no equity or very little, such that when values dropped, they quickly dropped below what they could sell the properties for after subtracting equity.

Again, it is important to remember, this involves Trillions in loans, not billions or millions. And the practices not only affected Fannie and Freddie by their lending policies, it spilled over into the lending practices of other banks, as a collective mindset. Not only that, the values directly influenced also pulled along or influenced all property values, including those that had sound loans, but the values were still skewed out of balance. CRA was one policy around which much of this is related, although not all, but certainly one important piece of the puzzle. All of this is simple common sense.

Also consider the fact that property value affects many other aspects of people's lives and budgets, as well as business situations. Equity in property can be used to fund or borrow against for purposes of other expenditures and investments. It is one of the central kingpins of our economy, no doubt. Nothing this large in the economy can occur in a vaccuum. The phony lending practices that quote unquote helped everybody buy a home even when they could not previously qualify under normal circumstances, to the tune of trillions, the idea that this has not permeated the entire economy in a toxic way is total ignorance of how the economy works.

For you to sit here as supposedly an educated and sophisticated person and claim okie here is without a brain, I think just a smidgeon of common sense could be applied to this entire scenario. It is not rocket science.

http://www.foxnews.com/politics/2009/07/14/obama-expects-uemployment-tick-months/

"Obama Expects Uemployment to Keep Ticking Up for Several Months
The president said Tuesday that renewed employment typically lags behind other signs of improvement as a swooning economy turns around.

President Obama says unemployment is likely to tick up for several months as the economy recovers from its deepest downturn in decades.

The president said Tuesday that renewed employment typically lags behind other signs of improvement as a swooning economy turns around.

More than 2 million jobs have been lost since Congress passed Obama's $787 billion economic stimulus package. The unemployment rate stands at 9.5 percent, the highest in 26 years.

Obama said the single biggest challenge for the U.S. and other nations is the creation of enough jobs that pay good wages.

He spoke in the Oval Office after meeting with Dutch Prime Minister Jan Peter Balkenende."

Obama's idea of creating jobs apparently lies with increasing government, criticizing profits as greed, and threatening to tax people that create jobs at a higher rate. Also throwing cap and trade in the mix. Brilliant, Barack, just brilliant!

Never waste a good crisis, and I am sure he doesn't plan on it.

okie, As usual your knowledge about politics or economics is nil. It wasn't only the sub-prime loans that got our economy into trouble; it was the banks and finance companies that gambled on derivatives. As I stated earlier, most of the toxic loans were not homes but commercial property.

Those people walking away from their property will have difficulty finding another place to live; their credit rating is the first thing renters of property checks on applicants. They must also show steady employment, and responsible financial behavior. During all the years I had rental property, I had to remove only one tenant.

Your myopia about most subjects shows your ignorance. Most issues are multi-faceted; not one dimensional as you believe. It makes me wonder how you graduated at the top of your class.

I think its all tied together, interwoven. None of this exists in a vacuum. Thats what you just don't get, do you? You pass off the trillions in loans held by Fannie and Freddie as having no effect. I think you are totally wrong.

You make claims you don't back up with evidence.

You wrote:

I didn't say it didn't have any effect; I said it was not as big a problem as commercial property. If you have bothered to keep up with recent news articles on this subject, you would also know this. Most of the toxic loans were for commercial property.

I also said that the economic crisis was exacerbated by the banks and finance companies trading in derivatives. This is another common knowledge fact that seems to escape your diatribe.

Yes, but the value of those derivatives were impacted by values of property contained therein, or related thereto. Property affects not only itself in terms of value, but the values of businesses and their related assets and investments. When loans for property became influenced by non-market forces, such as government mandates, such as CRA, it created an atmosphere of building a house of cards, creating the potential for a meltdown, a domino effect. Anytime you create a situation that violates sound business business practices or loan practices, you set into motion a chain of events that have unintended consequences. Again, I think Fannie and Freddie should simply be eliminated or phased out over a period of time, as they are political entities that have intruded into where they should never have been. People are running around blaming private enterprise, when in reality it has been government intervention that has created the problem. There are solutions for companies going broke, such as bankruptcy laws. With the government, they continue the same failed and irresponsible policies that got us into this mess in the first place.

Yes, but that's where the banks and finance companies failed; they didn't bother to ensure the value of those derivatives. They based their actions on greed rather than good fiscal management.

A good example, Fannie and Freddie, they served as a good template for what you just said. And why wouldn't banks make stupid loans, if Fannie and Freddie would buy them? If I could bundle dozens of worthless used cars and sell them somewhere, I would start buying worthless used cars, wouldn't you?

It's because they are two separate entities. Sloppyness in one industry doesn't give license to other industries to do the same. However, in your world, that might be what's expected.

Principles of human nature apply in many realms of business, ci. If a person can make a buck without being accountable, they will.

Well, not everyone is a Conservative. If there are significant negative effects to society or others associated with 'making that buck,' many of us will not do it.

Cycloptichorn

Yeah, but that doesn't really have much to do with 'redlining,' which is what Obama's firm sued Citibank for doing. It isn't a ton of poor black and mexican folks who have lost their houses and caused the problem we see, it's people of all economic classes - and increasingly the rich; the losses banks have taken on expensive houses are huge.

Cycloptichorn

The mindset of conservatives is make money through fraud, and our government shouldn't tax it, because they "earned it."

Not really. The value of those derivatives was gigantically impacted by the fact that the company who sold them, for the most part, did not keep money on hand to back their losses. Without that, the market would not have collapsed the way it did, and our economy would not have been put in danger last Fall - though losses would still be heavy.

A lack of regulation of financial products, and the attitude that the market can 'self-regulate,' caused the problem. It had next to nothing to do with the CRA at all. Why don't you do some research on the areas hardest hit by the subprime (and increasingly Alt-A) mortgage failure, or the economic status of those who have been losing their houses.



You are 100% incorrect on this one, Okie. Even you must admit that greater regulation of the Credit Default Swap market would have kept the collapse from happening.

Cycloptichorn

Well, not all of them.

Cycloptichorn

okie doesn't seem to understand anything; his perceptions about why our country and the world's economy went into a tailspin seems lost on okie in all its reasons and causes.

He claims he graduated at the top of his class, but most of his opinions on a2k are without foundation/fact/evidence.

I feel sorry for all the kids that attended the same school; they were cheated out from a good education - and all were "above" average...