Superb article on sub-prime crisis…

7 02 2008

I lifted this Dean Barker article from the website found here:   http://www.commondreams.org/archive/2008/02/05/6841/.  Not really much to do with Canada (yet) but raises some interesting issues towards the end.

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  We are nearing the end of the subprime crisis, but this is not exactly grounds for celebration. There are still millions of low- and moderate-income homeowners who are facing the loss of their house through foreclosure. Nothing currently on the horizon seems likely to change this fact.

    The reason the subprime crisis is about to fade from the headlines is that the mortgage crisis is moving upmarket. The rate of foreclosures among people with prime loans has been rising rapidly. By the end of the year, the foreclosure rate on prime loans will be where it was with subprime loans just a few years ago. The reason is simple: House prices are plunging.

    The latest data show house prices were falling at a 16 percent annual rate in the fourth quarter of 2007 and were already down by almost 8 percent from their year-ago levels. In several cities, the rate of price decline was considerably more rapid. In San Francisco, prices were dropping at a 22.2 percent annual rate, in Los Angeles at a 24.7 percent rate and a 27.0 percent rate in San Diego.

    This rate of price decline means millions of recent homebuyers, who put little or nothing down on their home, now have houses that are worth less than the value of their mortgage. This is important for two reasons. First, homeowners with no equity in their homes have no margin for error. If they lose their job or get a serious illness, they cannot borrow against equity to pay their mortgages through the bad times.

    This is the situation that has caused many subprime homeowners to lose their homes. While predatory mortgages are a key part of the story in many cases, if the house was worth more than the value of the mortgage, it would always be possible to borrow against the equity to meet a monthly mortgage payment. If house prices were not falling, the subprime crisis would not be happening.

    However, there is another dimension to this story. When the house price is less than the value of a mortgage, there is a strong incentive to give up a home even if the homeowner is able to pay the mortgage. The logic is simple. Suppose a homeowner owes $400,000 on a home that is now worth just $300,000, a situation common in places like Los Angeles, Miami and San Diego. If the homeowner continues to pay their mortgage, they will have eventually paid $400,000 (plus interest) for a home that is worth $300,000. That’s not a very good deal.

    Alternatively, suppose the homeowner decides to buy the comparable home across the street for $300,000, and stops sending the mortgage check to the bank each month. The bank will presumably foreclose on the first house, but the homeowner has effectively pocketed $100,000 on the day he moves across the street. That would be a good payday even for the Wall Street crowd. Of course, the bank will take a big hit, since it will not be able to recover anything close to its original $400,000 loan, but that is not the homeowner’s problem.

    Is it moral to just walk away from a loan and leave the bank holding the bag? That’s an interesting question.

    We live in a country in which CEOs can run a corporation into the ground and then walk away with pay packages worth tens, or even hundreds, of millions of dollars. Equity and hedge fund managers, who rank among the richest people in the country, have successfully lobbied Congress so that they pay a lower tax rate on their earnings than schoolteachers and firefighters. After walking away with this multi-million dollar tax break, at least one prominent member of this crew has been leading the charge to cut Social Security, pointing out he doesn’t need his Social Security check.

    Then, we have the pharmaceutical companies and insurance industry. They designed a Medicare drug benefit that will unnecessarily add hundreds of billions of dollars to federal spending over the next decade, and needlessly complicate the lives of tens of millions of seniors. Of course, this benefit will add hundreds of billions of dollars to their profits over this period. And then, we have Halliburton, Blackwater, and the other defense contractors in Iraq and Afghanistan. Nothing needs to be said about this one.

    In this world, is it moral to profit by walking away from a mortgage you can actually afford to pay? Perhaps President George “WMD” Bush can address this issue for the country in a fireside chat.





Late nights and iPod vending machines…

29 01 2008

OK, well getting out of the airport took a bit longer than I thought.  I don’t think we left until about 3am and I did not get to my frozen car until after 6am.  When I finally got it going, paid up and left the car park I was just in time to hit the morning rush hour.  Joy.

I had Internet issues at the airport after the last posting and my battery died shortly after so the Internet entertainment did not last long.  I had plenty of time to get some healthy Burger King meat related products and have a wander through the Vegas airport departure area.  That took all of 10 minutes.  Vegas airport did, however, have one feature I’ve never seen before.  They had an iPod vending machine.  See picture below:

iPod vending machine.

Kind of a neat idea to sell iPods and related products at the airport.  I can imagine the disappointment, however, when some poor sod buys one to pass away the time at the airport and forgets that it won’t be charged.  I tried to find a live plug to connect my laptop to but the only ones to be found were in a crowded area of the airport that was on the opposite end from our gate.  All the other ones we could find were DEAD.  That’s useful.

There was one additional element of excitement.  After we had first got the airport and got through the security check (bags XRayed, etc) a blue light and alert went off.  A bunch of us had just got through and us (amongst others) were kept from going anywhere else in the airport whilst they sorted out this security issue.  It only took about 20 minutes.  A sniffer dog came and went and various important and serious looking people in rent-a-cop outfits came and went.  From what I could gather it looked like that an older couple had made their way through the security check and forgot one of their bags.  I guess the security guys realised they had an extra bag that nobody seemed to want and wanted to get it cleared (hence the dog).  I saw a sheepish looking older guy and his wife brought back and he collected his bag.

When we did finally get on the plane the flight was further delayed as the front landing gear needed some immediate maintenance so we had to wait 40 minutes on the plane before it even took off.  When we got to Edmonton and it’s -35 wind chilled temperature we had a further delay as the ramp that connects up with the plane wasn’t working in the extreme cold.  Cue another 10 minute wait before we could get off.  Then there was the huge queue in customs but, to be fair, that went as quick as they could make it.  Bags were there and straight outside into the cold to wait for the Park & Fly shuttle to take me to my car. 

My car, reluctantly, started on the 1st try.  There was this 5 seconds of a burning smell then it seemed to be ok (probably a belt of some sort not being able to turn something in the engine for a short bit due to the cold).  Lots of snow drifts in the car park but fortunately luck was on my side and my car needed minimal snow clearing and I had a clear path to the booth to pay.

Got into the Park & Fly booth to pay my fees.  Lots of people there.  Waited my turn and played the people watching game.  This poor woman came in looking for a boost as her car would not start.  Amazingly the car park folks were not able to help her.  First it was a case of having to wait for the shuttle bus to be free to help then she was told that they did not have any functioning vehicle at all with jumper cables (or, more likely, no jumper cables).  I really felt for that poor woman and I have to admit I was a bit annoyed at the Park & Ride.  They are managing a car park service near the airport.  Think about it:

  1. People will be leaving their cars for days at a time.
  2. We live in CANADA.
  3. CANADA can get COLD from time to time.
  4. Peoples cars probably won’t start from time to time.
  5. Having to give an occasional boost is part of the job.

Looks like another clue for sale is needed.  I did not have any jumper cables in my car or I would have helped her. 

I should probably look into getting some.

On that note… it’s supposed to be -38 tomorrow (no wind chill included).  Food for thought.





How to configure your facebook account…

23 11 2007

I found this great blog posting that describes how to setup your security settings on Facebook.  Even better it shows you how to block invites from applications so you don’t get bombarded with 50,000 $#(*$# invites to pirates, ninjas or whatever other annoying app seems to be the flavour of the month (I have to confess a tendancy to send invites for some apps that give you a bonus for doing this <shame>).

You can find it at : http://internetducttape.com/2007/07/23/howto-configure-facebook-application-privacy/





Clue finder…

30 10 2007

Fantastic!  The perfect product for the clueless!  Keeps with the theme of the blog title too 🙂  Who said web surfing was a waste of time… This also qualifies as probably the most useful product Norton has ever come out with.

Ever wonder if Peter Norton was a real person?  I always suspected he was just a cardboard cutout they dragged out of the closet for photo-ops and book cover pictures.

 Norton Cluefinder!

Perfect for the Oiler fan in your life who thinks they will see the postseason!!!