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Tuesday, September 30, 2008

Thoughts on the economic disaster

Why should we care about the crisis on Wall Street?

There are a couple of angles here. One is that the current troubles are beating the heck out of the values of our retirement funds and savings for our kids' education. That's ugly news, but it's not unexpected. Stock prices have been inflated for a long time now, and it was just a matter of time before they started coming down to where they belong.

The other bad side to all of this is that if no one can get a loan from a bank -- for education, for housing, or to run their business -- people are going to start losing their jobs. Except for undertakers, seemingly no one would be immune from unemployment if things got bad enough. If enough folks wind up out of work, the depressing effect on the economy would cascade across many companies and industries. We could all wind up on bread lines together.

Thus, the ability of creditworthy people to take out loans on reasonable terms seems to be a key value, if not the key value, here. But banks are hoarding cash and won't lend it out, even to each other. Witness the announcement by Legacy Emanuel Hospital that it's pulling the plug on a building project that it's already started, because it can't get a loan to finance the construction. What can the government do to get the sources of debt capital to loosen up?

One step that's being discussed is to bolster the federal deposit insurance system. With greater maximum insurance coverage over any account, depositors would presumably be less likely to withdraw savings from banks and use them to buy Treasury bonds. With less of a threat of a run on the banks, the banks might be more willing to lend out cash.

The key word there being "might." Who knows what's motivating the world's "funding sources" these days, other than fear? And unless the object of their fear can be correctly identified, it can't be adequately addressed. Cranking up the maximum bank balance that's insured may help ease the credit crunch a little, but probably not much.

Here's a different idea that we've been mulling over for the last couple of days: If the banks won't stop hoarding cash, it may be time for the government to step in and do the banks' jobs for them. For $700 billion, why doesn't the federal government just start a direct loan program, making loans to worthy homebuyers, students, and businesses?

Of course it would involve a new government bureaucracy; of course the loan criteria would have to be a lot stricter than the laughable "standards" that have prevailed in the lending game in recent years; and of course establishment of such a program would violate the Republican Party's free market catechism. But if these are really such desperate times, then radical action is needed.

Let's not hand Paulson and Bush our kids' future so that they can give it away to the Masters of the Universe. Let's take the credit crunch by the horns, and not filter the solution through the greedy hands that have wrecked the economy. The top bureaucrat running the program could make around $200,000 a year, instead of $20 million.

Comments (28)

Paying banks to say they have confidence is like paying a hooker to say she loves you.

I think the further we get into pretend mode the worst it will get. Besides we've got to keep the value of the dollar from fading away.

Did I really read that we injected over 600 billion into the banks recently? How often can we do that?

And isn't that a bail-out already?

The reason your highly excellent and eminently reasonable idea will never happen is precisely because Paulsen and his chums won't get the money.

Because, you know, if you made 17 Million for 20 days working as the CEO of Whoo Hoo!, it would just feel so much better if you acually made 18 Million. Because your standard of living would just go up that much more.

"... what's motivating the world's "funding sources" these days ...."

Jack, you persist in imposing a projection of 'independent' integrity on, or in, certain institutions and 'departments' of society and this country. As if 'bankers' were some 'detached' conclave with its own motivations and aims and practices and -- 'integrity' in a word. As if 'government' is 'those guys over there,' in a meeting, organized, under direction (however disjoint or confused, still and all an integral unit operating in its own purview and manner), apart and of itself.

And on and on in the same sense for other 'groups' and 'institutions' -- the unions, the working class, the military, the manufacturers, ('manufacturing sector'), the consumers, the media, etc.

They are not. These are not distinct separate 'components' of society, standing apart on their own turfs, doing their own things, acting in their own interests. Only they are not; what the 'conjectured groups' is, is a 'structuring' (or, as the A.I. researchers say, a 'chunking') of society imagined and imposed by the mind in order to comprehend the dynamic whole, through sequential study of its manifold facets, (what you call "the angles on it").

Nothing is "motivating" the 'bankers.' They are making it up as they go along. Playing in the game, seeking to optimize advantages in their own interests. The only 'motivation' is their own particular survival ... in and of the status quo.

I wonder how many repetitions it takes to 'get it,' hearing it said by experienced ones who have been involved participants IN the dynamicism, in the central core, where power-assigning decisions drive the actions of all the 'institutions' in unison -- which you see, (and the 'outsider' mind naturally distinguishes in order to organize its understandings), as all the parts working separately. And said by those who are IN or have been IN the 'center of power,' that sufficient influence there can plan actions and force or induce all the parts to act congruent with that 'issued' plan, (not act independently with each part have its own integrity).

Let me try to rephrase the idea using a metaphor. Society runs like a clock. On the face of it, it shows the time of day. That time makes ('forces,' 'induces') the cogs and gears to turn as they do; NOT the other way around, that the gears and cogs 'makes' the time of day. There is no use, or influence, to be able to understand each of the separate cogs and maybe even to change the position of individual cogs, and thus change or tell a 'new' time of day. Instead, when one is in a position (with influence) to reach out, touch, and move the hands of the clock, that changes the time of day, that aligns all the parts and cogs in lockstep positions with it -- that 'changing the time' is metaphor for social revolution.

There is one 'MasterMind' of its own direction by sufficient influence 'orchestrating' all the subject parts, ('bankers,' the Market, the terms of legislation if not enactment, consumer prices, and so on), to align and 'play along' with the planned 'score.' Yes, it's the 'big conspiracy' model of events. Only 'conspiracy' is the wrong word, and the wrong denotation, where it conjures the image of an ubergroup, meeting in a single room, setting the agenda and calling the plays. On the one hand, it is simply one single individual, or two, or a few, operating in sync for days and weeks and years with a shared idea of 'direction' among themselves. (Fairly much of all events for 60 years now, are the plans of only David Rockefeller, 1915, GHWBush, 1924, Kissinger, 1923, and the King of Saudi Arabia, 1924. Period. That simple.) And on the other hand, it is veritably a group of conspirators, literally meeting in a single room, assigning each other's division of responsibilities toward an intended 'goal' or 'ideology.' (Heads of State or corporations or institutions, who control main 'cogs' or 'sectors' in society.)

The metaphor of 'orchestra' is another insightful view of it. The different instruments all follow one musical score. Rewriting the notes that the violins play, or the trumpets play, does not change the music. Instead, one has to be the 'conductor' who can reach out and pull up a different score for all the instruments to follow and play together.

Anyway, what the 'bankers' and 'stock market' and 'political parties' and 'media' are doing today, this so-called 'crisis' of social economic reformation, (or 'collapse'), consists in playing the score as orchestrated in (choosing) the enactment of the Federal Reserve, 1914. And 'pulling out a new tune to play,' amounts to replacing the Fed.Resrv.

About 1914-ish is when this whole idea got started that oil (reservoirs in the Earth) is someone's private money; that oil is money; and then the whole thing about (inventing) cars and airplanes and chemicals and electricity generation and so on, all the oil-connected 'things.' And now oil is running out, and so this is the end of 'money' and the end of all those 'things.'

But it is difficult or impossible to see, and comprehend all the events of a century happening connected together, 'orchestrated,' until the mind makes the leap to the idea of a 'singular theory,' a 'conspiracy,' and stops examining the entrails and organ 'parts' separately ... trying to find, or, actually, never knowing to seek, where is the life of the beast ... what's the 'sum' of all the parts.

Just very basically, the Powers That Be, (those 4 named, fairly much), simply reached up and reset the clock and the time of day for all of us (society), by staging 9/11.

And here's where they're headed with it:
Pre-election Militarization of the North American Homeland. US Combat Troops in Iraq repatriated to "help with civil unrest", by Michel Chossudovsky, 2008-09-26

And here's someone else who is saying the same thing I am trying to express:
WHAT REALLY HAPPENED TODAY, Michael C. Ruppert, September 29, 2008, 7 P.M. PDT - For years I have told you exactly what was going to happen and it has. Today's economic meltdown, with the Dow dropping 777 points and $1.2 trillion in equity lost is no exception. In our second FTW Economic Alert back in 2002 I predicted ....

How many times, in different ways, must it be said until folks see the 'lightbulb moment' and 'get it.' We can change (revolution) the Time, by ourselves. We, the People, 'R' society. Think of dollar bills the same way you think of Confederate money, printed by the Southern Confederacy States for the Civil War -- not really 'worth' much. We can make our own 'not-dollars' money amongst ourselves.

{Poof!} end of crisis. end of Bushbutchery. end of oil. end of problem. (Incidentally, end of any 'worth' for all the tax laws, and tax law knowledge you hold, Jack, as your stock in trade.) Start of society playing a new tune on a new score of sheet music.

If the government gets into direct loans, what is to stop various pressure groups from convincing congress to demand loans to various groups that would not be able to repay. (Like the conservatives say contributed to the present problem.)

The great Bail-out scandal of 2008. Someday, somewhere, a history class will be taught how Fascism overtook Amerika.. Only creditable verbiage I have read is:
"We are now in the golden age of thieves. And where I come from we put thieves in jail, we don't bail them out." — Rep. Pete Visclosky, Democrat."

I still say that if any of these banksters want to borrow that kind of money from the taxpayers at this point, they need to put up some very solid collateral.

Like all of their hard assets, property, gold...factories in China...all of it.

Think of what 700 billion dollars might be worth in 5 years.

Half of what it's worth today ? One fifth ?

One thirtieth ?

"why doesn't the federal government just start a direct loan program, making loans to worthy homebuyers, students, and businesses"

Because, unfortunately I don't think the govt would be any less likely to issue any better quality loans to people than the private sector would. We've had SLMA, FNMA and FMAC try this and lose pots of money. At least with banks, until they buy $700B of loans, it's just been write-offs against profits and stock price crashes. With a govt program, every loss would be out of the taxpayers pocket.

The other issue is going to be political motivation - Is there going to be someone like a Sam Adams and Earl Blumenhauer deciding that iffy theater companies, condo and CC hotel developers and green companies should get cheap loans because they're friends and family while normal businesses pays more because they employees have to drive to work? With politicians its not their money so why would they care if a loan goes south?

Having said that, yes, if this $700B goes thru, there has to be some limit on exec compensation if a bank wants to participate.

I watched Representative Sherman on Kudlow last night and he made it sparkling clear how this bill was written to bail out foreign investors:

"The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury.

Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure that can happen."

Prime Minister Gordon Brown thinks it is our responsiblity to bail out the world:

The United States has a responsibility to the world and not just itself to sort out its teetering economy, Prime Minister Gordon Brown said Tuesday.

"They [the financial problems] started in America, they've got to be sorted out. I believe that the Americans have come to realise that they have a responsibility to the rest of the world as well as to themselves."

"Did I really read that we injected over 600 billion into the banks recently? How often can we do that?"

I think those are overnight loans that banks get from the Feds that get credited back once accounts get settled.

One other point, I am starting to see more deals die or get frozen due to a lot tighter credit in just the last two weeks in RE.


The Federal Government is already in the direct loan business to farmers, automakers, homebuyers, and apartment owners. With AIG, they are also in the insurance business on many of those same industries. The government also provides repayment insurance for some of the nation's largest exporters (farmers, Boeing, Caterpillar) to qualified foreign buyers.

Federal oversight is a big part of the reason that mortgage documents frequently exceed 50 pages.

I'm not sure we really want more government intervention into our daily lives: their track record is spotty at best. Just because they have the deepest pockets doesn't make them the most qualified to operate a business.

Bought a house (I think I'm the only one in Portland that has a bought a house)....anyway, it was a steal (most likely lower now!)...but anyway....I'm sticking 50% down on this pad, got 5.75 rate....not bad. But listen to this gang, THE BANK HAD NO FUNDS ON CLOSING DAY! No joke. I'm suppose to call daily to see if they are ready to transfer the money. This is a first! I have lost all CONFIDENCE in this ugly crooked economy. We snicker about other countries and their bad governments, we are worse. The difference is, our political hacks wear nicer clothes and know how to talk into a camera. Slicker but much more dis-honest. If they cant fund by Monday, I'm walking on this deal. Its the new Countrywide now owned by B of A

"Its the new Countrywide now owned by B of A"

Interesting. When BofA bought Countrywide, they purposely kept COuntrywide off BofA books - so no loans from BofA to Countrywide unless special exceptions?

What's really sad is that it isnt like Barney Frank (house banking) or Orrin Hatch (senate banking) or Bush weren't aware of this for a year+. Yet nothing happens until stuff blows up.

I have less faith in govt than the economy/free market.

There is virtual unanimity among academic economists that the paulson-dodd asset buyback plan does not address fundamental issues with solvency. Lack of transparency (abolition of mark to market) and price controls (paulson plan) are akin to throwing gasoline on the deflationary fire. The government needs to take ownership of financial institutions rather than their derivatized and securitized trash.

Unfortunately the sheeple are now scared and support for this economic patriot act is skyrocketing. Nothing is more entertaining than seeing a nation destroy itself.

Got popcorn?

So sorry BARRY, I hope things work out for you. I, too, too have lost all faith in our system. Our leaders have let us all down. Again. Still. We watch them pander to the different political factions telling us what we want to hear, all dressed up in fancy power suits, white teeth, selling us the snake oil.

It's a total joke. And the joke is on us.

All we can do is take care of ourselves, our families, be good people, help out our friends and neighbors. The rest is out of our control.

Cynical? Yep, and for good reason.

Seems as if everyone is speculating as to what the real situation is, the only underlying common certainty being that we can't trust what we're told about the nature of the problem or the efficacy of the proposed solution. In other words, our society has become -- perhaps fatally -- dysfunctional.

vida Suburbia, there is one thing you can do which will get their attention. Let them know you're mad as hell and aren't going to take it anymore, then vote them out of office.

"Got popcorn?"

Got a better solution besides short selling?


Your idea would probably work but would take more time and overhead to accomplish. The current plan on the table will work quicker by just setting a price for some of the more toxic assets. Once a price gets set then everyone knows what the score is and the ball gets rolling again.

The guys in DC just need to prime the pump and get the system moving again and then they can step out. If they do it halfway right they'll make a profit on the toxic assets. Not sure why the average person doesn't seem to have a clue on this, maybe becuase the average person doesn't think much about macro-economic issues? There sure is a lot of silly discussion on this topic all over the place. Some of it by people who should know better!

Does the FDIC insure depositors or does it insure particular banks?

Just as a bank, or any company, can be dissolved in a day so too a new company can be formed in a day. A new bank can accept the deposits and use them to serve the credit needs of the public. A new bank, however, would not be hobbled by the present cob webs of secondary contractual relationships about risk transference.

A depositor should be free to choose with whom they do business. A typical depositor, by reason of FDIC insurance, should have no qualms about just moving their cash to some other bank. The concern, from the depositor's perspective, of a run on any bank is rendered negligible by reason of the FDIC coverage.

Should the present set of players in the financial community act as an oligopoly/monopoly so as to thwart the emergence of a replacement set of competitors? This would strike me as anti-competitive, as an artificial barrier to entry.

Some folks have seized on the lax constraints of Fannie Mae and Freddie Mac as an excuse. This however completely misses the point that no home loan originator was compelled by law to increase the amount lent, regardless of or precisely because of favorable interest rates (cost of money), by purposely overvaluing collateral.

18 USC 1014

"Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of the [ . . .] Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Farm Credit System Insurance Corporation, or the National Credit Union Administration Board, a branch or agency of a foreign bank ([. . .]), or an organization operating under section 25 or section 25(a) [1] of the Federal Reserve Act, upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both [. . .]"

Will Congress repeal 18 USC 1014, and make it retroactive so as to exercise the power to pardon criminal conduct? I guess if the government serves the role of a market maker then I would have a hard time making my argument that the prices were (and are) too high relative to application of the income method appraisal of a home. The key feature of the income approach, the capitalization rate, is to isolate out the cost of money and facilitate comparison between classes of investments by an investor. But of course you already know this and so too does anyone that holds themselves out to the public as a certified professional appraiser. Every overvaluation is "willful."

If the collateral was priced right wholly irrespective of a borrower's credit characteristics the cost per home, per foreclosed home, would be confined to the transaction costs of putting the collateral back onto the market, and lost accrued interest. The provision in the legislation that allows for reduction of principal on a loan cannot be understood as anything other than an admission/acknowledgment that there had been a criminal overvaluation, and should be further conditioned on action by the DOJ against the applicable parties/professionals (or civil action on the matter to retrieve the money from the seller, in the interest of protecting the taxpayer).

The politics of the current "bailout" proposal, the proposal to offer a financial reward for criminal conduct and for the organized effort by financial institutions to feed a false belief in calamity, has a clear parallel to the politics of the demand for a cut in the capital gains tax early in Bill Clinton's first term in office. The mere prospect of a possible cut in the rate set off a reduction in the volume of transactions while the owners awaited the reduction. It is no surprise to see in the Senate version of the "bailout" bill a capital gains tax cut component. The same bad actors are again playing the same game.

The assets subject to purchase under the bailout bill are clearly overvalued, "willfully" by all parties involved. The "assets" that Paulson wants to buy represents unsecured/undersecured debt (principal and accrued interest and penalties) incurred by natural persons who are already deemed insolvent for purposes of obtaining a tax write-off of debt as "wholly or partially worthless." The assets cannot simultaneously be valueless and yet have a value that is high enough to escape criminal action under 18 USC 1014. The creditor and the IRS agree on this fact issue of insolvency, and that it is perhaps not even necessary for the creditor to wait until the last day before the expiration of the statute of limitation for submitting a claim to a court to reduce the claim to a judgment and thereafter enable collection over the next ten to twenty years. In fact, the cost of litigation alone is deemed to be a waste of time . . . as they would expect to collect less over time (perhaps over the next 26 years -- the present value calculation of the same) than what they can obtain through reduced tax obligation immediately from the write off today.

When I hear anyone claiming that there might be a profit from the bailout I cannot help but picture the government joining in a bankruptcy petition and paying off the creditors (in full) and then themselves demanding that the insolvent person pay up, or else. Paulson's preposterous proposal wanted to achieve precisely the same effect, enmass, as if he were a fancy bankruptcy judge (czar) himself and where the creditors reined supreme and where due process for the individual would be a foreign concept.

Ultimately: Could anything Paulson planned/plans to do be construed as the equivalent of a final judicial determination of rights between private parties? If it could then the matters he wants to address should instead be resolved individually or by an appropriate class action, in a court.

If the actions intended to be taken by Mr. Paulson are not equivalent to a final judicial resolution of rights between private parties could I as a debtor assert that I have an equitable claim against any money he may have placed into the hands of a creditor on my account? Could the debtor, ironically, assert that in the event of a discharge of the private debt or modification of it in the favor of the debtor that this should result in a return to the taxpayer of money that was advanced to the creditor? (I use the term advanced in the same way that it has been interpreted for student loan funds operated by states. The federal government claims they own the fund, and not the state.) Surely Mr. Paulson would not want to foreclose such a possibility, from the perspective of both a debtor and taxpayer, would he?

If I still had access to West I could go cut and paste from an RTC related court case where the RTC had to choose the cheaper of two options, closing a bank or selling it overnight as an ongoing enterprise. The maximum government expense was/is pegged to the cost to cover FDIC-insured deposits. There was absolutely no nonsense about protecting particular banks or protecting the whole financial system, esoterically. The FDIC insurance scheme was and is the means of protecting the financial system. It remains an adequate means.

With my anti-monopoly perspective I am more inclined to observe that if JP Morgan Chase and Bank of America demand and receive any unearned gift from the federal government so as to convert their present unsound condition into a sound condition, that they should instead be closed down immediately. They are both quite familiar with the process, as the frequent purchaser of the assets of smaller fish that have been closed. Bank of America was recognized as unsound (but for some "lenience") during the week preceding Mr. Paulson's presentation of his preposterous proposal, his preposterous demand for an unearned gift.

Mr. Paulson and the head of the FDIC should be sitting in the hot seat of a congressional committee hearing answering demands as to why it is that Bank of America has not yet been stripped of the privilege of wearing the FDIC-insured label!

Federal Reserve Offers No Cash but Loosens Standards on Emergency Loans
September 15, 2008

But before the weekend was over, it was also clear that they could stand by their principles — and be creative, too. For example, if Bank of America completes its acquisition of Merrill Lynch, its capital reserves would immediately fall below the minimum requirements for bank holding companies. Regulators, including the Federal Reserve, would have to show lenience for as long as it takes the capital markets to regain their confidence — which could be quite a while.

It is called "lenience."

Administration officials acknowledged last week that more bank failures were inevitable, and the main protection for depositors — the Federal Deposit Insurance Corporation — is likely to exhaust its reserves.

This issue of inevitable exhaustion of FDIC funds, under current law, should take first priority over Paulson's preposterous proposal.

Shall we rename the bill the Bank of America Preservation And Expansion Act?

Maybe folks could single out Bank of America . . . and move their deposits to some other local institution.

Peter DeFazio has what seems to be a reasonable solution on LouDobbs website.

Sorry to hear about your closing woes, BARRY. I bought a house 11 months ago, and every single deal and program that I was able to use in order to make it happen is now gone.

I made a mortgage payment this morning, and it was real hard to not write the check for half, and put a note in the envelope saying that they'd be receiving the other half when they get their check from Congress.

I don't pretend to know that much about economics - I resent having to try and figure this crisis out and long for a more innocent time when we just worshipped celebrities in this country.

What would you rather hear about? The taxpayers losing their shirts or Britney losing her panties?

But it is our responsibility to fight through this, so here goes: President Bush thinks with his guts because it makes it more convenient to talk out his a*s.

That's what I do. That's actually creating this case a joke.

Too many people in this economy think that playing the markets is some sort of noble endeavor. Sitting there with your laptop shorting this or that, might provide a good living but what have you really made? And spare me the part about raising capital so that other people can build something. It's not about that and you know it. You're just living off the movement in the economic machine.

Maybe what we're seeing is a tipping point where the financial parasites are killing the host.

Fittingly, now that we are in trouble, the answer is to pump more money here or there to try and make the numbers do this or that.

We've got to start thinking of what we can build next in this country to get us out of this. The truth is that Britney may be silly but she actually produces CDs and pictures. There is a product with her that sells around the world.

I'm tired of all these slick people sitting around their laptops making bets on other people's work. Why don't you actually create something yourself? Skip the derivative market. Go out to the workshop, make something, and save America.

To Mr. (long-winded) pdxnag, a few points -

Pretty easy to start a bank; pretty hard to move its asset base up to a couple hundred billion. Thats what it would take to compete with BofA, etc.

No home loan originator "over valued" the real estate; the originator is entirely dependent on an independent appraiser to determine the value.

The income approach to value is not used for owner-occupied residential real estate. Determining value via the market approach is expressly allowed by FIRREA.

A decline in real estate value by itself is not an indication of "criminal overvaluation." Real estate values have always been subject to changes in the market; this is not the first time real estate values have declined.

The assets that the US Treasury would purchase represents both viable and non-viable debt. There is no indication that ALL the mortgages backing the securities will default. For example, JP Morgan wrote dowm WaMu's loan portfolio by about 10% - JP Morgan's estimate of bad loans.

The government may earn a profit on the bailout, as it will not be buying the debt for face value. The Treasury Dept would purchase the debt at a discount and sell at auction, similiar to what it did with the S&L assets. It is doubtful that the bailout will actually cost $700B when the dust settles.

This situation IS different from the S&L bailout in that the S&Ls were only a specialized part of the financial system. Commercial banks are a crucial part of the system.

To deplict JP Morgan as an unsound bank is a bit of a stretch - the purchase of WaMu required JP to raise $8 billion in additional capital - which it did in ONE day.

It is pretty clear from your comments that you have no idea how the credit markets work, thus your statement regarding a "false belief in calamity." As an individual working in the banking industry, I can already see how this crisis is filtering down to affect otherwise solid businesses.

the originator is entirely dependent on an independent appraiser to determine the value.

Give me a break. Appraises are under intense pressure to tell the lenders what the lenders want to hear, which for decades now has been that the values are high enough to support the loans in question (and thus the lender's fees). Any appraiser who won't play along most of the time won't have clients for long.

A friend of mine used to say that the appraiser designation "MAI" means "made as instructed." He was only half-joking.


If you poll a dozen realtors, I would venture that 9 or 10 of them have lost a sale (or two or three) in the past two years because the appraisal came in lower than expected.

Clearly, a "short appraisal" is more likely to happen in a declining house price environment. Does that mean most realtors/appraisers are engaged in fraud at the top of the market in housing? I don't believe so. It is notoriously difficult to call the top of market, particularly during a buying frenzy.

"Got a better solution besides short selling?"

Short selling *was* working. The hard nuggets of economic sh** were about to plop into the bowl. Next up -- exit via perforation.

"Does that mean most realtors/appraisers are engaged in fraud at the top of the market in housing? I don't believe so."

Maybe not fraud in the legal sense but its hard to find scenarios where monopolistic private enterprise can be guilty of fraud in this banana republic

"It is notoriously difficult to call the top of market, particularly during a buying frenzy."

Especially if you are a shill for relitters.

"As an individual working in the banking industry, I can already see how this crisis is filtering down to affect otherwise solid businesses."

As an individual in the banking system you also see what you believe will help you keep your job. Sorry bankster, the party is *over*.

Gosh you lot are gullible. BARRY's story of 50% down and 5.75% is BS. And BARRY if you are not full of shit, please provide the terms of this supposed loan. The expressions of sympathy that this post generated were interesting. Clearly the "loan-ownership is the path to happiness meme" is still in full effect in PDX. This will change dramatically over the next few years.

"Appraisers are under intense pressure to tell the lenders what the lenders want to hear"

That may be true for small community banks, or at big banks in the distant past. However, many banks seperate the appraisal function away from the line and do not allow the loan officer to interfere.

My job is pretty secure. Actually the title "loan officer" as used by the mortgage lenders is a misnomer. Those individuals are sales people, not bankers. The day-to-day operation of commercial lending requires significant knowledge and trainibg in accounting, financial analysis, risk analysis, loan structuring, pricing, etc. Commercial lending (primarily providing working capital) may slow, but it will continue - that is what keeps the economy moving.

"working capital" is supplied by a depositor, who can choose another Banker as easily as they can change their underwear, if they wear any at all . . . because of the FDIC. Some folks might just be too lazy to change.

Here is a useful advisory from the Board of Governors of the Federal Reserve System, SR 03-4, February 25, 2003. Be sure to also read the linked attachment. Pay particular attention to "fair value." (Also references "economic value.")

Once mortgage interest rates go back to 10 to 12 percent for a period of time the various methods of appraisal will again be in harmony, but only temporarily.


As a lawyer/blogger, I get
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In Vino Veritas

Lange, Pinot Gris 2015
Kiona, Lemberger 2014
Willamette Valley, Pinot Gris 2015
Aix, Rosé de Provence 2016
Marchigüe, Cabernet 2013
Inazío Irruzola, Getariako Txakolina Rosé 2015
Maso Canali, Pinot Grigio 2015
Campo Viejo, Rioja Reserva 2011
Kirkland, Côtes de Provence Rosé 2016
Cantele, Salice Salentino Reserva 2013
Whispering Angel, Côtes de Provence Rosé 2013
Avissi, Prosecco
Cleto Charli, Lambrusco di Sorbara Secco, Vecchia Modena
Pique Poul, Rosé 2016
Edmunds St. John, Bone-Jolly Rosé 2016
Stoller, Pinot Noir Rosé 2016
Chehalem, Inox Chardonnay 2015
The Four Graces, Pinot Gris 2015
Gascón, Colosal Red 2013
Cardwell Hill, Pinot Gris 2015
L'Ecole No. 41, Merlot 2013
Della Terra, Anonymus
Willamette Valley, Dijon Clone Chardonnay 2013
Wraith, Cabernet, Eidolon Estate 2012
Januik, Red 2015
Tomassi, Valpolicella, Rafaél, 2014
Sharecropper's Pinot Noir 2013
Helix, Pomatia Red Blend 2013
La Espera, Cabernet 2011
Campo Viejo, Rioja Reserva 2011
Villa Antinori, Toscana 2013
Locations, Spanish Red Wine
Locations, Argentinian Red Wine
La Antigua Clásico, Rioja 2011
Shatter, Grenache, Maury 2012
Argyle, Vintage Brut 2011
Abacela, Vintner's Blend #16 Abacela, Fiesta Tempranillo 2014
Benton Hill, Pinot Gris 2015
Primarius, Pinot Gris 2015
Januik, Merlot 2013
Napa Cellars, Cabernet 2013
J. Bookwalter, Protagonist 2012
LAN, Rioja Edicion Limitada 2011
Beaulieu, Cabernet, Rutherford 2009
Denada Cellars, Cabernet, Maipo Valley 2014
Marchigüe, Cabernet, Colchagua Valley 2013
Oberon, Cabernet 2014
Hedges, Red Mountain 2012
Balboa, Rose of Grenache 2015
Ontañón, Rioja Reserva 2015
Three Horse Ranch, Pinot Gris 2014
Archery Summit, Vireton Pinot Gris 2014
Nelms Road, Merlot 2013
Chateau Ste. Michelle, Pinot Gris 2014
Conn Creek, Cabernet, Napa 2012
Conn Creek, Cabernet, Napa 2013
Villa Maria, Sauvignon Blanc 2015
G3, Cabernet 2013
Chateau Smith, Cabernet, Washington State 2014
Abacela, Vintner's Blend #16
Willamette Valley, Rose of Pinot Noir, Whole Clusters 2015
Albero, Bobal Rose 2015
Ca' del Baio Barbaresco Valgrande 2012
Goodfellow, Reserve Pinot Gris, Clover 2014
Lugana, San Benedetto 2014
Wente, Cabernet, Charles Wetmore 2011
La Espera, Cabernet 2011
King Estate, Pinot Gris 2015
Adelsheim, Pinot Gris 2015
Trader Joe's, Pinot Gris, Willamette Valley 2015
La Vite Lucente, Toscana Red 2013
St. Francis, Cabernet, Sonoma 2013
Kendall-Jackson, Pinot Noir, California 2013
Beaulieu, Cabernet, Napa Valley 2013
Erath, Pinot Noir, Estate Selection 2012
Abbot's Table, Columbia Valley 2014
Intrinsic, Cabernet 2014
Oyster Bay, Pinot Noir 2010
Occhipinti, SP68 Bianco 2014
Layer Cake, Shiraz 2013
Desert Wind, Ruah 2011
WillaKenzie, Pinot Gris 2014
Abacela, Fiesta Tempranillo 2013
Des Amis, Rose 2014
Dunham, Trautina 2012
RoxyAnn, Claret 2012
Del Ri, Claret 2012
Stoppa, Emilia, Red 2004
Primarius, Pinot Noir 2013
Domaines Bunan, Bandol Rose 2015
Albero, Bobal Rose 2015
Deer Creek, Pinot Gris 2015
Beaulieu, Rutherford Cabernet 2013
Archery Summit, Vireton Pinot Gris 2014
King Estate, Pinot Gris, Backbone 2014
Oberon, Napa Cabernet 2013
Apaltagua, Envero Carmenere Gran Reserva 2013
Chateau des Arnauds, Cuvee des Capucins 2012
Nine Hats, Red 2013
Benziger, Cabernet, Sonoma 2012
Roxy Ann, Claret 2012
Januik, Merlot 2012
Conundrum, White 2013
St. Francis, Sonoma Cabernet 2012

The Occasional Book

Marc Maron - Waiting for the Punch
Phil Stanford - Rose City Vice
Kenneth R. Feinberg - What is Life Worth?
Kent Haruf - Our Souls at Night
Peter Carey - True History of the Kelly Gang
Suzanne Collins - The Hunger Games
Amy Stewart - Girl Waits With Gun
Philip Roth - The Plot Against America
Norm Macdonald - Based on a True Story
Christopher Buckley - Boomsday
Ryan Holiday - The Obstacle is the Way
Ruth Sepetys - Between Shades of Gray
Richard Adams - Watership Down
Claire Vaye Watkins - Gold Fame Citrus
Markus Zusak - I am the Messenger
Anthony Doerr - All the Light We Cannot See
James Joyce - Dubliners
Cheryl Strayed - Torch
William Golding - Lord of the Flies
Saul Bellow - Mister Sammler's Planet
Phil Stanford - White House Call Girl
John Kaplan & Jon R. Waltz - The Trial of Jack Ruby
Kent Haruf - Eventide
David Halberstam - Summer of '49
Norman Mailer - The Naked and the Dead
Maria Dermoȗt - The Ten Thousand Things
William Faulkner - As I Lay Dying
Markus Zusak - The Book Thief
Christopher Buckley - Thank You for Smoking
William Shakespeare - Othello
Joseph Conrad - Heart of Darkness
Bill Bryson - A Short History of Nearly Everything
Cheryl Strayed - Tiny Beautiful Things
Sara Varon - Bake Sale
Stephen King - 11/22/63
Paul Goldstein - Errors and Omissions
Mark Twain - A Connecticut Yankee in King Arthur's Court
Steve Martin - Born Standing Up: A Comic's Life
Beverly Cleary - A Girl from Yamhill, a Memoir
Kent Haruf - Plainsong
Hope Larson - A Wrinkle in Time, the Graphic Novel
Rudyard Kipling - Kim
Peter Ames Carlin - Bruce
Fran Cannon Slayton - When the Whistle Blows
Neil Young - Waging Heavy Peace
Mark Bego - Aretha Franklin, the Queen of Soul (2012 ed.)
Jenny Lawson - Let's Pretend This Never Happened
J.D. Salinger - Franny and Zooey
Charles Dickens - A Christmas Carol
Timothy Egan - The Big Burn
Deborah Eisenberg - Transactions in a Foreign Currency
Kurt Vonnegut Jr. - Slaughterhouse Five
Kathryn Lance - Pandora's Genes
Cheryl Strayed - Wild
Fyodor Dostoyevsky - The Brothers Karamazov
Jack London - The House of Pride, and Other Tales of Hawaii
Jack Walker - The Extraordinary Rendition of Vincent Dellamaria
Colum McCann - Let the Great World Spin
Niccolò Machiavelli - The Prince
Harper Lee - To Kill a Mockingbird
Emma McLaughlin & Nicola Kraus - The Nanny Diaries
Brian Selznick - The Invention of Hugo Cabret
Sharon Creech - Walk Two Moons
Keith Richards - Life
F. Sionil Jose - Dusk
Natalie Babbitt - Tuck Everlasting
Justin Halpern - S#*t My Dad Says
Mark Herrmann - The Curmudgeon's Guide to Practicing Law
Barry Glassner - The Gospel of Food
Phil Stanford - The Peyton-Allan Files
Jesse Katz - The Opposite Field
Evelyn Waugh - Brideshead Revisited
J.K. Rowling - Harry Potter and the Sorcerer's Stone
David Sedaris - Holidays on Ice
Donald Miller - A Million Miles in a Thousand Years
Mitch Albom - Have a Little Faith
C.S. Lewis - The Magician's Nephew
F. Scott Fitzgerald - The Great Gatsby
William Shakespeare - A Midsummer Night's Dream
Ivan Doig - Bucking the Sun
Penda Diakité - I Lost My Tooth in Africa
Grace Lin - The Year of the Rat
Oscar Hijuelos - Mr. Ives' Christmas
Madeline L'Engle - A Wrinkle in Time
Steven Hart - The Last Three Miles
David Sedaris - Me Talk Pretty One Day
Karen Armstrong - The Spiral Staircase
Charles Larson - The Portland Murders
Adrian Wojnarowski - The Miracle of St. Anthony
William H. Colby - Long Goodbye
Steven D. Stark - Meet the Beatles
Phil Stanford - Portland Confidential
Rick Moody - Garden State
Jonathan Schwartz - All in Good Time
David Sedaris - Dress Your Family in Corduroy and Denim
Anthony Holden - Big Deal
Robert J. Spitzer - The Spirit of Leadership
James McManus - Positively Fifth Street
Jeff Noon - Vurt

Road Work

Miles run year to date: 5
At this date last year: 3
Total run in 2017: 113
In 2016: 155
In 2015: 271
In 2014: 401
In 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269

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