1929 All Over Again

There was a great financier who stepped in on the second day of the Stock Market Crash in 1929. He was the richest man in the country and he had decided enough was enough. He would personally save Americas bacon by bailing out the stock market. He went around and bought shares in every large company, infusing millions and millions of dollars  all over the stock market horizon. The market would not crash on his watch and for a while it seemed to work. The crash paused while people took heart that the richest man in the world had just rescued the market and by proxy the American economy. Then it went to the floor.

Now we seeWarren Buffet bailing out Bank of America with billions. Bank of America stock goes up nine percent and people are taking heart that one of the richest men in the world is giving the bank a vote of confidence. Too bad he gave the money to the wrong people. Bank of America is in the toilet because our homes are worthless and becoming more worthless. He should have just given the money to the homeowners. The bank mirrors the market and the derivatives that killed it and is now on the hook for billions in litigation. The great ship Buffet will not stem this tide. Bank of America is too big to fail but it seems destined too.

Because no one is doing anything for the very people who can bail out BOA: their customers. The bank prefers to just let everyone default while they foreclose on people whose only sin was to own a home that is now worthless. Bank of America is the Titanic of the Housing Crash. She holds tons of soured mortgage securities pawned off to people who are now suing them. She bought Countrywide. Talk about an iceberg laden with sub prime garbage. And she is taking water so fast that even Warren Buffets patch will not work. What is scary is that Buffett had to do this.

And what will the government do? Bail them out again? More money after bad. President Obama better do something for housing or he will be the Captain John Smith of the SS BOA breaking in two and heading for the icy darkness of our second Great Depression. Oh, that financier who tried to bail us out the last time: JP Morgan.

http://www.billhazelgrove.com/

Rocket Man

The Dirty Little Secret of the Banks

Maybe you heard that another seven million homes will go into foreclosure in the next two years. Maybe you heard that the average salary at Goldman Sachs is now seven hundred thousand dollars. That is the average. Maybe you have heard that loans don't go though and the promised loan modifications have taken place for only a handful of people (something like twenty thousand loans were modified.)

Maybe you heard that appraisals are routinely cut to the point where the loans are rejected or that credit card rates are skyrocketing and the banks are loading up fees on checking accounts. Maybe you heard that the new Johnny Depp movie is very popular because people are identifying with John Dillinger against the banks. There is a reason for all this: the banks have decided the middle class is a bad bet. And they really don't want to lend money anymore.

I have taught, sold real estate, waitered, worked construction, worked in a bakery and brokered a few loans during my long tenure as a writer. During the boom you put the loan in and generally they went through. I stepped out of the part time brokering when my book came out. Times being what they are, I put my license with another firm this year and put in a few loans. Every one came back denied.

Why? Every appraisal was slashed by the banks. Every income was questioned. Every Fico Score did not measure up. These were all people with stellar credit and good income. Their homes were in the Chicago land area. But all these people were denied. I put in a few more loans but they never made the cut because of the amount of points I would have to charge just to put the loans through. I realized then that the whole system was set up for one thing now--to reject ninety percent of the loans. As another broker told me, "The banks don't want loans. They don't want to lend anymore to the middle class."

This is the dirty little secret. The banks have received their TARP money. They are fat and sassy once again. But none of that taxpayer money is trickling down because the banks simply do not want to lend anymore. Not to the average American. Sure. If you have an eight hundred Fico. If your debt to income ratio is 24/32. If your loan to value on your house is 50 percent and you have a fat 401k or bank account (six months reserves PITI) then you might get a loan. Might. But effectively the banks have set parameters that wash out ninety percent of the people.

If you have dealt with the banks then you know what I am saying. They are not modifying loans. They are not trying to work with people. They are simply foreclosing and selling the homes on the short sale market. They are giving lip service to the Obama administration, but they are essentially zombie banks--institutions that have been propped up by the government,but are not fulfilling their mandate to lend money to ease the credit market. The credit market is still shut off and there is no credit for the middle class.

Brokers and people who work in the banking industry all know this. Applications are still taken. People go through the drill, but you know the loan will not go though. It is all for show. The system is now set up to keep people out of the lending market. The very people who created this mess are ensuring they will have enough money to stay afloat and that means keeping it for themselves.

The talk on the street is that the only loans going through are government loans--FHA. These are insured loans by the government. The only person lending now is Uncle Sam, but the bottom line is that until you get money back into the hands of the middle class then this recession will only get worse. You would think the banks would know this...or maybe they just don't care. Looks like Johnny Dillinger is about to have a comeback.

http://www.billhazelgrove.com/

Anytown USA--God and Realtors

A soggy Midwestern town among the cornfields. Heartland USA. The realtor's meet in the old Victorian home from a couple of centuries before. They eye the man who has no business being there. He is writing a book or something but I'm allowed to sit in their meeting. We are a cross section of old and new America born before and after the last big recession in 74. Just had a bypass the owner tells me and asks that I not where jeans at the meetings. No problem. Rain outside the windows and in the old furniture now musty.

"My husband and I promised God that we would go to church every Sunday if the recession would end."

I look at the woman who gives me a fist full of cards.

"Just in case you know anyone."

I ask that she not miss any Sundays and she laughs. The meeting centers around a man who gives PMA speeches at churches. Three basic tenants. Help someone else. Don't hang around people who are complainers. Change. The meeting is not unlike a sermon. A lot of Christian themes swirl around but then again we are in the heart of Illinois. Cows and cornfields just outside the window. Everyone agrees that times will get better.

The owner tells about his parents. They bought some land during the Great Depression but couldn't afford to build on it. So they built a one room shack and lived in it until after the War.

"My father dug the whole basement by hand...can you imagine that?"

No. But maybe I will one day. They were pay as you go people.

"No one here is starving and we should thank God for that."

The meeting then breaks up and I get back in my car and head for Chicago. It's raining hard and I drive past old farms now empty. Glad the banks are doing better.

http://www.billhazelgrove.com/

And Here's To You Mrs. Robinson--end of the big suburban home

I have one word...just one word, Ben...plastics. This line by the pool of a large suburban home summed up the prosperity of an era or the mass consumption that Dustin Hoffman would rail against. The Graduate could be shot today by a pool in a large suburban home, but there would probably be For Sale sign in the front. The booming economy that produced those homes in the sixties seventies and eighties and nineties is gone and so is the dream of the big suburban home. Mrs. Robinson drinks from a large bar that spills out to a patio that spills out to a pool. Ben runs from one monster house to another.

Cut to 2009. The very people who now own those homes...one word, just one word Ben...cant find that one word anymore. What is the new thing? What is the plastics of our new era. It is not cars and it won' t be large suburban homes. Maybe ...solar panels...or hydrogen...or...fuel cell technology. Whatever it is the next generation will not be looking at large homes. For many reasons, but the biggest one will be that the banks will never make those loans again.

I'm sorry Mrs. Robinson but your debt to income ratio is out of whack. Mr. Robinson you don't have six months reserves and a job of two years with a W2 that shows you make two hundred and fifty thousand a year. I'm sorry Mrs. Robinson, but you don't have the twenty percent to put down. Mrs. Robinson, you were late on a credit card and your credit score dropped to 650...we only lend on 700. No, I'm sorry, we don't do stated income anymore or interest only loans.

The only reason big homes were able to be built in the first place was that the banks would give people loans on stated incomes and qualify them under teaser rates or adjustable rate mortgages that started out in the three percent range. Or the famous NO DOC loan that required nothing but a social security number and a FICO score. Then you could put Mrs. Robinson in her home. But not anymore.

Out where I live there are many large empty homes. I don't know what they will do with them. They will never sell. Why? Because middle class people will never qualify for them and whats more people don't' want them. The utilities alone on Mrs. Robinson house today runs a cool six hundred a month. And that's with Voice over IP. These are not energy efficient homes. They were not built that way. These monsters cost an arm and a leg to heat and cool and throw in that electric bill (do you know what it costs to keep Mrs. Robinson's pool warm?) and you are headed straight for the poor house.

Taxes. Nobody wants those taxes anymore. Out where I live (suburb of Chicago) taxes start around ten grand and on the big homes we are talking twenty four thousand dollars. That's a cool two grand a month without the mortgage. Don't forget maintenance and filling large homes with furniture Mrs. Robinson's home was magnificently appointed. The scuttlebutt among realtor's for a long time has been that a lot of the McMansions are empty. People would move in and didn't' have the money for the furniture. Many a cable guy has told me this story as well.

When the banks return to health they are going be loathe to make those jumbo loans. Only the truly rich will qualify and they probably won't want them either. All those spec homes you see out there are now owned by banks who got them from builders who couldn't make the note--that will be a painful reminder that they won't forget. So if your dream is to throw your money away on a house, then you better be hauling it in.

But the biggest reason is simply that the era of the big home is over. Conspicuous consumption has given everyone a nasty headache and culturally we have moved on. Greed is out and what was that thing called the American Dream? Maybe a big house won't make us happy. Green homes. Green cars. Waste not. Want not. We are truly moving into a different world.

So here's to you Mrs. Robinson...and Ben I have just one word...one word...downsize!
http://www.billhazelgrove.com/
http://www.pantonnepress.com/chapter1.pdf

The Bleeding Dog and the Masters of the Universe

Enough populist rage. Let's cut to the chase here. Middle class people are practical and sensible so lets look at it that way. If you have a bleeding dog and take him to the vet and he says well I can help him but it will cost you a ten thousand bucks and I don't know if he will live or not anyway, but you don't have a choice, you must save him. You then look over at the dog pound and think, but if I get a new dog then that will only cost me five hundred. You look back at your bleeding dog. He has had a long life and it is his time. You must do this, the vet says, or the dog will die! You look at the dogs in the pound. They are eager, frisky and just want a place to run. So you have a choice. Shovel money after your old dog or let a new dog have his day. But you do what the vet tells you and pay the ten thousand.

Or let's look at it from a mechanical standpoint. You have a steam engine. It runs on coal. It doesn't work. You take it to the shop and the man says well you need a new cylinder, run you about ten thousand. That's funny you say, I just put a new cylinder in there. The man says, nope you need another one. So you do it and you take it home and it still doesn't run. You look in the firebox and see there is no coal there. You could have saved your self five grand by just buying a five hundred dollars worth of coal, but the mechanic kept telling you it is the engine.

The Masters of the Universe still are telling us what dog to save and how to fix our engine. The common element to both of these scenarios is they get the money. They are the vet and they are the mechanic. Capitalism is all about selling. Everyone is selling. The Masters of the Universe are selling too. They are selling their positions, their jobs, their way of life. They are saying who we have to save and how much and unfortunately no one is really questioning them. If you buy into the Banking System Must Be Saved, then you are doomed to failure. This implies an all or none scenario. This implies all banks will fail if we don't buy their bad debt for trillions of dollars. The dog will die and the engine won't run.

Alright, lets break it down to this. If you give a family a ten thousand dollar check. They will spend it. If you give them a twenty thousand dollar check. Then they will spend it. If you give them a thirty thousand dollar check, they will spend it. Here is a diagram:


Please read from bottom to top.


UP!
GOES
MONEY


Now read from top to bottom


MONEY
DOESN'T
GO
DOWN!


So if we give money to the butcher, the teacher, the secretary, the salesman, the accountant, the mechanic, the doctor, the conductor, the writer (had to get that in) then they will spend it and money will go UP! But if we continue to donate money for the bleeding dogs, because the Masters of the Universe tell us to, then we will just lose the money. The dog is bleeding and no one can stop it. Sometimes, you just have to get a new dog.

You've Got To Be Kidding

Fool me once shame on you. Fool me twice, start a revolution. You have got to be kidding. AIG now is taking the money the government gave them and paying out MILLIONS of dollars in bonuses. Listen up all my friends who work for a living...they are taking your dollars (we now own eighty percent) and paying out not thousands, not hundreds but MILLIONS OF DOLLARS to individuals. Some people are receiving a million dollars and more in one check! You are going to love the rationalization--it would be illegal not to pay them. Oh OK. WHAT!!!!!!!!!! You mean the company that bought tons of bad derivatives, the very people the financial arm of AIG the very people that bought this stuff...THEY ARE THE ONES GETTING THE MONEY! It would be like driving a bus off a cliff and then getting paid a million dollars for doing it. The treasury department raised a stink but determined the bonuses are LEGAL. WHAT???????????? So, a company that would not be in existence except for tax payer money (EIGHTY PERCENT) is saying that legally they have to pay the people who bankrupted the company. COME ON. Tell me they would pay them if they went bankrupt. This is straight highway robbery. You have to love the CEO justification. They can't attract quality people unless they pay them well. WHAT! Quality people! A bag lady who did nothing but sit at a desk could have done a better job than these guys--she at least wouldn't have thrown the money away on worthless mortgage back securites! These are the people who threw the company under the bus and now us. GIVE ME A BREAK. I mean if you are going to rob a bank and steal money at least use a gun and call it what it is. But to say it is legal is an insult to every person with an eight grade education. Even a kid knows when they are being gypped. And we are being gypped in the worst way. And here is the real shot between the eyes. They don't want to tell anyone what they are doing with the billions they are paying out. That money is going to Bank of America and others through back door insurance policies. So we are giving the money to more people who are paying other people bonuses and giving them trips.
The United States=Plutocracy. Rule by the wealthy. Plutocrats. A-I-G.

http://www.billhazelgrove.com

Those Poor Poor Bankers

Oh the shame. The shame. The Masters of the Universe have had their income tied down...Oh, No! A paltry five hundred thousand dollars. CAPPED! Why these men have suffered, they have single handedly destroyed the economy and this is how we show our gratitude by capping their income to the penurious amount of five hundred grand. No more junkets, jets, mansions, caviar, gold, silver, chateaus, beach houses, Rolls....Just a measly cup of coffee in a Starbucks lamenting the gold old days of making millions, millions by God and this is how they show their gratitude? I tell you what I would do. Let them keep their bailout money. We don't let anybody restrict our income. Five hundred thousand. Are you kidding? You couldn't buy a hot dog with that and they expect us to do our job on that? Nope. That's it. We won't take it. Keep your money and your five hundred grand...we'll do it the old fashioned way...what was that guys said from Merrill Lynch...oh yeah, we'll EARN IT. It's like they want us to be middle class or something. Why what's the average middle class family make now forty? Forty five? Who are you kidding? If I want to buy a jet then I'll buy one! If I want to go to Las Vegas and spend millions on a junket then I'm going! You don't tell me what to do. Five hundred thousand. I spit on that. Chump change for chumps. Wait until they see what happens when you tell bankers how much they can make. Banks will start to go out of business, buy worthless derivatives, mortgage backs, make bad loans...wait until that all starts, then whose going to be sorry? Hah?

What's Good For the Goose

Alright, so the banks get a get out of jail free card. And the automakers. And the airlines. And Amtrack. And the retailers (in the works). And whoever else in Corporate America who can find a friend in Washington. So how about the middle class? Radical. You cannot give money to the people...they might riot, tear the clothes off, not spend it...right. Sure, fine, ok, so you don't want to give money to the people. So lets not give money to the people...let's give them amnesty instead. Here's the deal. All the people slipping into foreclosure (up 81percent last month over a million a month) and declaring bankruptcy and not able to pay their bills, medical bills, credit card bills...they will all be knocked out of our economy. Why? Because their credit will be in tatters. FICO scores rule the day and if you declare bankruptcy or are late on a couple of credit card payments, can't pay your mortgage, your phone, electric, gas, then...(unlike the banks and the automakers and everyone else in greed land) you get a ding on on your credit. So, what happens? You get no credit. That's right. Out of the game. Millions and millions of people will not be able to buy a hut in the swamplands of Florida much less a house. They won't be able to buy a washing machine, fridge, car (durable goods you've heard of them) and so guess what, the very people you want to get back in there and start buying won't be able too. We could take the attitude of that is their fault. Fine. Then tell the banks and automakers and retailers and anyone else getting bailout dollars it's their fault too. What's good for the goose... is good for the gander.
http://www.billhazelgrove.com