I'm Sorry Mr. President, I Did Build My Mortgage Company, No Thanks to You

Think Positive September 18, 2012 at 09:44 pm

Tom you said: "Now the fed will borrow a certain amount from the treasury when its own reserves are reduced below a certain point".
You need to explain this. For you are the one that looks confused. What reserve??????

Think Positive September 18, 2012 at 09:57 pm

Lower interest rates do help the borrower, but they're not so good for the mortage broker. Maybe this is why Joe's so upset....
New Fed Rule for Mortgage Brokers The new rule is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid. Under the new rule, a lender can no longer pay a loan originator a lucrative rebate known as a yield-spread premium, which is tied to the rate or terms of the mortgage. Banks and other lenders can continue to pay commissions to brokers, but these payments must now be based solely on the loan amount. In the past, the higher the interest rate and points, the more money a broker stood to earn. http://www.nytimes.com/2011/02/20/realestate/20mort.html?_r=0

Think Positive September 18, 2012 at 10:11 pm

This is the best take I've seen on "Romney claims troops weren't important enough to include in his speech".
The video is sad and disgraceful, yet it explains what Romney said, and what is wrong with his comments. http://www.youtube.com/watch?v=ipIVfgQf-m0

R Eleveld September 18, 2012 at 10:16 pm

Kelly you made a statement that appears to be in error. “You're missing an interesting point that the size of federal govt has become smaller in recent decades, relative to both GDP and the size of the population” This chart would beg to differ with your statement on the GDP and population.
US Government spending as a percent of GDP has gone from ~30% in 1970 to ~40% in 2012. Population has grown from ~203MM to ~311M (~50%). The budget has grown from 322B to 3.6T. If you take 322B and adjust for buying power (CPI) the amount should be 1.9T, and if you use your logic of at a 50% population growth the 1.9T should be 2.85T. Your assertion is not holding up to data. http://flatrock.org.nz/topics/money_politics_law/boom_moves_along.htm http://www.usgovernmentspending.com/spending_chart_1903_2012USp_13s1li011lcn_F0t_US_Government_Spending_As_Percent_Of_GDP

Think Positive September 18, 2012 at 10:30 pm

Thanks for the link RE.

MAC September 18, 2012 at 10:35 pm

Maria, you need to take a basic accounting course before spouting off on the Economy, the RE crash and Tax law.
First of all, you are wrong about "Tax deductions as well as other government benefits increase an individual's or business' wealth." (From one of your prolific Saturday posts.) NO, Maria what increases "wealth" is usually the work/labor of those individuals/businesses. That is, until you, other uninformed voters and the other STATISTS (and corrupt politicians and their cronies), since Woodrow Wilson, enabled incompetent and/or corrupt congressmen/women to feather their own nests at the expense of the hard-working Taxpayers!! NO, Maria, the money EARNED by individuals and businesses BELONGS to them, NOT the Government!!!! You come to these discussions with your socialist, "progressive" views that government knows best, that IT is entitled to confiscate from people as much as YOU and your fellow-travelers want, to "redistribute" to yourselves and others who want the government to be their Daddy, the fruits of others' labors. Allowing people to keep some of their earning/profits is NOT a "gift" from the government, though Pelosi, Schumer, Obama et al tell us it is!!!!

R Eleveld September 18, 2012 at 11:02 pm

Kelly the Feds Fund Rate provides market sentiment. You are mistaken that the rates do not affect long term rates. Mortgages are tied to the rates for most people. The 10 yr treasury is the index often used for ARM’s. We use and calculate returns as a comparison to short and/or longer term rates.
The Weimar Republic did this increase in a very short period of time by printing money to pay off war debts, and those dollars flowed back to Germany decimating the poor and middle class, and not the wealthy. An increase in the money supply, (Fed buys bonds) increases the cash in the system. The fed if it sells bonds reduces cash in the system. QEIII is going to increase supply of currency. Our dollars circulate worldwide, and will do so until such point as the people see no value in US$ as a reserve currency. Then they will flow back to us quickly and that will hurt again the poor and the middle class.

GregoryRobertSamuels September 18, 2012 at 11:02 pm

Taxes are at a 60 year low and you argue that companies don't keep enough of their money? What planet do you live on? Time for the American public to face the fact we borrowed money for the two wars and Medicare part D...the bill is due, stop complaining.

R Eleveld September 19, 2012 at 01:30 am

Kelly, you threw a kitchen sink here. I am not going to try to comment on most of what you wrote because you are going all over the place. SO I will stick with the first few lines.
When regulations are written they define acceptable or unacceptable behavior. Compliance departments review actions within the scope of that acceptable and unacceptable behavior and the moral compass gets a little fouled up. Compliance costs beget larger entities because the requirements become more onerous. It is not the only reason for size but it is a calculation that goes into the mix. So does the ability to lobby with more force as you represent more employees, clients, and general stakeholders. Politicians are not economists, and actually most I believe are lawyers. They know how to write laws, not judge the behavior of those they write the laws for. My regulators might as well be plumbers, as they are NOT licensed to be in my profession. Think about that for a minute. We are regulated by the State, the Feds, an SRO and internal compliance departments. How much more do we need? Libor issues were known by Timmy who did nothing. Good job Timmy. Actually erroneous LIBOR cost some and benefited others inversely. You do believe everyone is out to screw someone. The re-characterization has to do with Hedge and PE firms and the tax code. If you do not like that, vote out those in office. They are responsible.

R Eleveld September 19, 2012 at 01:37 am

Kelly BTW you are correct about the fed funds rate which is currently around 0.16% per annum. I do not believe we will see a rise in rates for another 2 years give or take a little.

R Eleveld September 19, 2012 at 01:43 am

The Federal discount rate is the loan program. The rate is 0.75% currently.
From the Fed website: "The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window. The Federal Reserve Banks offer three discount window programs to depository institutions: primary credit, secondary credit, and seasonal credit, each with its own interest rate. All discount window loans are fully secured."

R Eleveld September 19, 2012 at 01:46 am

Patrick your comment is very accurate... "And the more debt we have, the harder it is to get to a surplus."

R Eleveld September 19, 2012 at 01:59 am

AS of a week or so ago assets on the Fed’s balance sheet sit at around $2.8 trillion.

Steve Bristol September 19, 2012 at 01:26 pm

Patrick
The linked article provides the response: "Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal." Those deals wouldn't accomplish what Pres. Bush wanted so why agree to them? Beyond that, how about personal responsibility? It MUST have been those terribly greedy bankers holding a gun to their heads to force them to sign loans. Peddle it somewhere else.

Ben Rodriguez September 19, 2012 at 01:54 pm

President Obama did what he had to do to maintain jobs in the middle of an economic disaster. He pulled us out of the nose-dive. Reagan and Bush exploded the deficit, everyone knows. Romney is proposing to do the same with tax cuts for the rich, cuts to entitlements and more handouts to oil companies (that don't need them). Studies show how "trickle down" economics has screwed the working class and only balloon wealth at the top but people don't like to face those facts. Only sling mud at the President, which is no game plan.

R Eleveld September 19, 2012 at 02:03 pm

@Clemson Tiger. The greed you refer to also infected and I will say started in part on Main Street and more specifically the Real Estate Agents(REA) and Mortgage Brokers(MB) in tandem. The Real Estate Agent could not close on a home without financing. Mortgage brokers would not have clients if not for the Real Estate Agents pushing bad situations. The client does not go to the broker in advance of looking for a home, they look for $ after they find a home or an agent.
REA's and MB's, are paid a commission based in whole on the sales price of a property and the buying agent and the selling agent are both vested in a higher price. The Agent is the FIRST line of defense! They should have reasonably known the financial capacity and status of the home buyer. They knew people that were risky so they sent them to mortgage brokers that could broker a bad deal. So it is the agent that carries the burden of the real estate mess more than anyone else. This is the untold story. Why? The money and power they exert. Wall Street is a location name that seems to say greed and corruption, however in reality I never heard of anyone closing on a property and having a 'wall street banker' present at the closing. The people that were hurt by Wall Street were sophisticated investors and that should make liberals and anti wall street people happy.

R Eleveld September 19, 2012 at 03:01 pm

@Ben, We need to flatten the tax system, creating a few steps and no deduction system.
We need to re-evaluate entitlements because we can’t balance the budget without it and to say otherwise is disingenuous or indicates a total lack of understanding the mass of the problem and the growth of that issue. We need to re-evaluate defense spending and government departments like Education which for much of our history was a very local issue and should be a local or state issue. We need to get out of the farm business. We need to get out of the energy business. We need to enact no changes to tax codes after flattening for no less than 10 years without a 3/4 vote of Congress. Nixon, Carter, Reagan, Bush, Clinton, Bush and Obama all added to the deficit each President after Nixon added significantly, and Obama continued that trend. Today ~40% of the budget is borrowed. Bush in 2006 had to borrow ~260B or <10% of the overall budget. Obama in 2011 (data available) borrowed 1.3T or ~36%. Cont.

R Eleveld September 19, 2012 at 03:02 pm

> Cont.From ’06 to ’11 Pensions, Protection, General Government, and Healthcare have increased by ~50%, defense by a ~1/3rd, and welfare has almost doubled. The source below is quite interesting.
So Ben you want to try that spending argument again. 2007 had the lowest deficit of the period ’06-’11 (see source). The Obama deficits went from $458 in ’08 which is the last Bush budget, to 1.4T the first Obama budget. The difference is not explained by the revenue reduction alone(419B) The deficit has stayed at <10% of 1.4T. Revenue declined from 2.5T for Bush to ~2.2 on average for Obama and that does not explain the gap. The table below is very interesting and worth a few minutes of study. The deficit in the aggregate went from ~10T in ’08 to 16T today, and it will be close to 17T when someone is sworn in for another 4 years. This is not sustainable. PERIOD! Also note that what Obama spent in 4 years deficit wise is what Bush spent in 8 years! Look there is blame to go around. What I do nto hear are solutions. Source: http://www.usgovernmentspending.com/federal_budget_detail_2011bs12006n_G0#usgs302

Maria Giannuzzi September 19, 2012 at 08:02 pm

You know, BTL, the Democrats share responsibility, but the operative word is "share" and someone as smart as you should acknowledge this. You have to acknowledge the problem to fix it, and you want people to believe that only one party or certain individuals are at fault. You do not want people to understand that big money by banks and others had a great deal to do with the recent financial collapse and mortgage debacle.
Follow the money folks, not operators like BTL and others on the far right. Look at which donors and corporations have contributed large sums to lobbying and political campaigns during the past decade. Check out who made money during the housing bubble and after the economic collapse. Examine government statistics. They paint a grim picture.

Maria Giannuzzi September 19, 2012 at 08:08 pm

I am just repeating what economists say about tax deductions and credits. They are a substitute for government spending. You can argue that no one should pay taxes, but such a view doesn't work in the real world.

Kaptainsteve September 19, 2012 at 11:44 pm

More Irony....
"So a QE3, I'm certain, would continue with the erosion of the dollar. That's the channel by which I would see it impacting the economy because what we find is obviously in the data, that the wealth effect is a very significant determinative effect of GDP and employment," Former Fed chair Alan Greenspan Source/More Here http://www.realclearpolitics.com/video/2011/06/30/greenspan_qe3_would_continue_erosion_of_the_dollar.html "There is no evidence that huge inflow of money into the system basically worked. It obviously had some effect on the exchange rate and the exchange rate was a critical issue in export expansion. Aside from that, I am ill-aware of anything that really worked. Not only QE2 but QE1. I would be surprised if there was a QE3 [because it would] continue erosion of the dollar." Guess who??? Surprise....It is Allan Greenspan’s comments which came as the Fed ended the second installment of its bond-buying program, known as QE2, after spending $600 billion. There were no hints of any more monetary easing—or QE3—to come at this time!!! http://www.cnbc.com/id/43598606 Looks like I'm not alone wearing my tinfoil hat, it seems Alan Greenspan wears one too....

Kaptainsteve September 20, 2012 at 12:01 am

Forget the nonsense about taxes and who should pay more or less,,, even if they confiscate everything everyone makes it just ain't enough to bail us out of this mess.
We are beyond tinkering with the system now. The total take from income taxes is what 2-4 trillion per year and this all goes just to service the interest. Your taxes do not pay down a dime of the debt, not 1%, not a nickel and not even a penny. Face the fact. Your income taxes, EVERY CENT, go right to the FEDERAL RESERVE. It's all theirs baby. I think it's time to come up with a better plan and this ain't no job for any shade tree mechanics. This ain't my debt and it probably is not yours either. Let them, the government and the banks and the corporations, stick their debt up their chimneys and let's start over without them and their Ponzi scheming shenanigans. And, to all those with the bleeding hearts and charitable intentions, keep this out of any new governmental schemes and contain it amongst you and your like minded philanthropists. Be as charitable as you want, with YOUR OWN money. Government is supposed to protect our life, liberty & property, not provide us with anything else as that's the faulty thinking that got us into this whole mess to begin with. If we just let the banks and auto companies go broke, this mess would probably be all over by now. Now they'll start WW3 & appeal to patriotism as an excuse to rob us of our last pennies and freedoms as we enter our new Soviet style era.

Daniella Ruiz September 20, 2012 at 12:15 am

finally, someone with the guts to tell it like it is!
i'll write your name in on my ballot when i vote! ;-))

Kaptainsteve September 20, 2012 at 12:39 am

@Kelly
Watch and listen to Max and Stacey explain how the gov't and their bankster friends have rigged this game so WE can't win... http://youtu.be/Y2oLFayHebY

Patrick Herring September 20, 2012 at 12:54 am

Clemson Tiger....
Read the whole article. Put it in a proper context. The bottom line is this, Bush did nothing to stop the acceleration of the housing meltdown. The headline of the article said: "Bush drive for home ownership fueled housing bubble". Believe what you choose to believe.............

Ed Costello September 20, 2012 at 01:06 am

We have a winner!!!!! Thanks Kaptain!!!! I am with you!!!

Kelly P September 20, 2012 at 01:56 am

Classic incomplete quoting there Kapo.Read more closely - lender of last resort, not primary. Regardless of the perceptions of what does or doesn't happen at the Fed, you are very certain what the state of things is and equally certain that it is irreversible. But you don't lay out any reasonable path forward. You post here on this petty comment section about the grand scale of the disaster but give zero follow-on analysis of how people will handle it all, nothing but wild hyperbole. What is your goal if you swayed every reader to the same perspective? Is there some purpose to the vehemence of your statements, some method in the madness, some aspirational cautionary tale? No one will become an economist. No one will evacuate (although Canada demonstrated a lot wiser banking practices, and is much more stable so maybe you would like it there better). No one will become convinced. I suppose one might extrapolate the same questions to the larger scale of all these forms of detached interactions. But where do you find your goal lies? It's merely rhetorical so hold back a response if you can. And maybe we can all move on.

R Eleveld September 20, 2012 at 02:43 am

@Kelly, as I have written many times Canada cannot be compared to the US relative to the banking debacle for one primary and a solid secondary reason. In Canada to get a loan you are generally required to put down 20% of the value of the property, the old tried, tested, and true 80/20 formula. Yes it really IS that simple. Tons of not needed if you follow that simple rule. Simple concepts are the most difficult for many to fathom. Borrow no MORE than 80% of the value of the property.
The second factor is that they have their Federal budgets under better control. This is evident in the value of the CDN$ to the US$. See chart to understand we are losing in this situation. http://www.xe.com/currencycharts/?from=CAD&to=USD&view=10Y

Kelly P September 20, 2012 at 11:01 am

For RE- because Canada is more stable, as you pointed out, I was merely surmising that it should prove attractive to the sky is falling doom sayer whose comments I was addressing. This comment thread has lived long past any reasonable purpose so, taking my own advice, let's move on.

Andrew Ziemba September 20, 2012 at 02:12 pm

It's such a simple message isn't it? Isn't it incredible how few people get it? Speaking of the federal reserve, I think anyone who disagrees what you said needs to watch "The Money Masters" http://www.youtube.com/watch?v=EeIM-4hJO44 to educate themselves... Perhaps after that, they will join us to END THE FED!