tag:blogger.com,1999:blog-2222630007427380394.post2973161160834623961..comments2023-12-20T04:18:41.617-06:00Comments on The Hunting of the Snark: Giving Credit Where Credit Is DueSusan of Texashttp://www.blogger.com/profile/00076915322771385454noreply@blogger.comBlogger44125tag:blogger.com,1999:blog-2222630007427380394.post-45791682027467651902011-05-17T09:28:04.073-05:002011-05-17T09:28:04.073-05:00Her discussion of the tax credit is how we know Me...Her discussion of the tax credit is how we know Megan is not an economist. (Whether she is a finance person is left as an exercise.)<br /><br />She looks at the $8,000 tax credit and says, "Oooh, that's $8,000 for <em>me</em>! Free money; I want it!"<br /><br />Any moderately well-trained economist will say, "Hmm. $8,000 tax credit. I wonder how much of that will go to sellers and how much will be realized by borrowers." And, if they check history and behavioral economics studies, they'll conclude that the buyer will be lucky to realize $2,500 of that—arguably less in the DC area, where employment has been strong even through the b/e/g/i/n/n/i/n/g/ o/f/ t/h/e/ S/e/c/o/n/d/ G/r/e/a/t/ D/e/p/r/e/s/s/i/o/n/ Great Recession.<br /><br />At which point, the stimulus effect of the credit will be exactly what it was—a blip/caesura that gives the market a chance to change direction, not a new paradigm that ensures that it will.<br /><br />Ah, well.Ken Houghtonhttps://www.blogger.com/profile/01440837287933536370noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-18644612346124101542011-05-16T19:11:34.439-05:002011-05-16T19:11:34.439-05:00Myles - like Megan - loves to pontificate on subje...Myles - like Megan - loves to pontificate on subjects he clearly does not understand, like interest rates and mortgages.<br /><br />Myles - like Megan - actually believes that the banks are the victims of greedy homeowners (who trick them into offering 30 year mortgages!)<br /><br />Myles - like Megan - hates Elizabeth Warren and thinks she wants to destroy all the banks, even though that would mean the end of her own profession as well.<br /><br />In short, Myles is every bit as much of an idiot as Megan. But you know what? I am glad he is here. We need to be reminded of just how little intelligence it takes to be successful in today's society, so long as you are willing to worship the right masters.Syznoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-6751564178128716572011-05-16T09:50:47.364-05:002011-05-16T09:50:47.364-05:00How many people with 30 year mortgages actually ho...<i>How many people with 30 year mortgages actually hold them for 30 years? Perhaps Wells Fargo has some data about this and that's why it's willing to issue 30 year mortgages.</i><br /><br />This. Average mortgage is held for about 7 years. You pay almost exclusively interest at this time (unless you make extra payments). This is a good money bet for the banks. <br /><br />In fact the 7 year argument is how many banks seduced people into the ARM mortgages, then when the market cratered, home buyers had their interest rates explode at the same time they couldn't sell their house. <br /><br />Also, most banks are (as K Willow said) selling the mortgages before the ink is dry. <br /><br />Myles is right that it is crazy not to take a 4.5% interest rate for 30 years if it is offered, but 30yr fixed interest rates have been historically for over a decade, so I don't see this as a big reason to rush into a home purchase. My guess is property values sag more than interest increases over the next 2-3 years.fishhttps://www.blogger.com/profile/01522672049371678717noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-19909390312873421922011-05-16T09:05:49.485-05:002011-05-16T09:05:49.485-05:00The bank is just an arm of Wall Street, which loan...The bank is just an arm of Wall Street, which loans WF the money at 3.5%. WF turns around & loans out the money at 4.5%- to a half million people, and Wall Street sells the loans to investors. Most of those 30 year loan houses will be resold 2 times or more. Wells Fargo <i>will</i> make money: Wall Street and the Fed Gov will <i>make sure</i> of that, no matter what one Regulator says in a speech.Kathyhttps://www.blogger.com/profile/03176801494652946278noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-29130376703305571442011-05-15T22:28:18.217-05:002011-05-15T22:28:18.217-05:00Thanks for the link, anon.Thanks for the link, anon.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-36171449346944070772011-05-15T21:59:15.621-05:002011-05-15T21:59:15.621-05:00Also your info on Warren isn't quite correct; ...Also your info on Warren isn't quite correct; I don't have time to go over it but if read the comments at McArdle's posts on Warren you'll see what I mean.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-86390953391821480782011-05-15T21:54:41.036-05:002011-05-15T21:54:41.036-05:00Myles, surely there is a Wells Fargo web site that...Myles, surely there is a Wells Fargo web site that would be eager for your input. This site thinks that our financial system is neither sound nor has integrity. And we need people who want to protect the consumer; the banking system already has more than enough protectors already.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-81420867563325036602011-05-15T20:06:53.433-05:002011-05-15T20:06:53.433-05:00To me, it seems very obvious that Warren is a fina...<i> To me, it seems very obvious that Warren is a financial populist in the Prairie tradition, rather than someone who is dedicated to upholding the integrity and soundness of an international-grade financial system.</i><br /><br />Myles, our differences are not fundamentally based on logic, knowledge or history, but on values. Your reaction to that statement might be to oppose Warren, mine is to support her.<br /><br />It is entirely possible that a 30-year mortgage *at 4.6%* is financially unsustainable; that is by no means the same as saying that fixed-rate mortgages per se are bad. In the 1970s, before the spike at the end, they ran in the 7–9% range; I remember being advised to think about the affordability of 10% before making a decision. The 90s started at 10% and sank to about 7%. (Google "mortgage interest rates history" and it all pops up quick.)<br /><br />I dislike financiers trying to screw homeowners, and I am not in favor of the reverse either. I suspect Warren agrees.Petehttps://www.blogger.com/profile/03830774223073462725noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-87080218380139756512011-05-15T19:19:23.470-05:002011-05-15T19:19:23.470-05:00Myles, where did you get that information on Warre...<i>Myles, where did you get that information on Warren?</i><br /><br />The one I can find right now is this, where she premises that 30-year fixed rates have a legitimate place, by suggesting that a family should have taken a 30-year fixed instead of an ARM:<br /><br />http://www.law.harvard.edu/news/2007/10/03_warren.html<br /><br />Here's the Roosevelt Institute take, with which Warren is very closely affiliated:<br /><br />http://rortybomb.wordpress.com/2011/02/03/the-debate-over-the-gses-and-the-30-year-fixed-mortgage/<br /><br />My personal position is that 30-year and 15-year fixed rates should be banned except for very exceptional purposes. To me, it seems very obvious that Warren is a financial populist in the Prairie tradition, rather than someone who is dedicated to upholding the integrity and soundness of an international-grade financial system.<br /><br />MylesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-88975560621394941272011-05-15T16:10:18.396-05:002011-05-15T16:10:18.396-05:00http://videocafe.crooksandliars.com/heather/matt-t...http://videocafe.crooksandliars.com/heather/matt-taibbi-and-megan-mcardle-square-over-off<br /><br />Here's the link to Taibbi's schooling of Ms. Megan of Sunnybrook Farm.<br /><br />A classic.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-73030585306032774922011-05-15T14:28:12.596-05:002011-05-15T14:28:12.596-05:00Myles, where did you get that information on Warre...Myles, where did you get that information on Warren?Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-7519615997001763752011-05-15T11:37:13.732-05:002011-05-15T11:37:13.732-05:00It makes no sense, if you have a 30-year fixed at ...<i>It makes no sense, if you have a 30-year fixed at 4.6%, to not hold it through maturity,</i><br /><br />Unless you have to move to a different town, or your family grows and you need a bigger house, or any other number of things. <br /><br />EmilyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-86922170012050246682011-05-15T11:21:42.442-05:002011-05-15T11:21:42.442-05:00How many people with 30 year mortgages actually ho...<i>How many people with 30 year mortgages actually hold them for 30 years? Perhaps Wells Fargo has some data about this and that's why it's willing to issue 30 year mortgages.</i><br /><br />It makes no sense, if you have a 30-year fixed at 4.6%, to <i>not</i> hold it through maturity, because if you were to try to refinance it you would not get a lower rate. If the mortgaged were to be issued when the rate was like 7% or 8%, then it would make sense, but it isn't.<br /><br />Additionally, any data about hold-to-maturity would be discrete and would necessarily differ by clientele. The problem is that no just Wells Fargo, but every big bank out there, is offering 30-year fixed at 4.6%. Which means they can't possibly be doing their due diligence. Fixed, unlike adjustable, doesn't allow the loan officer a great deal of flexibility in setting rates.<br /><br />I actually have a pretty good guess what they are doing with the 30-year fixeds: they are <i>selling</i> them into specifically tailored mortgage CDO's. While the loan is a disaster for a bank to be making, it is more than a hundred basis points above Treasuries, so some investors get attracted to them. But of course leads to principal-agent problem.<br /><br />Why Megan isn't focusing on the ridiculous 30-year fixeds is completely beyond. She's against Elizabeth Warren; well, just about the stupidest thing Warren has ever done is push the 30-year fixed as a 'vanilla' option while demanding that banks hold on to their mortgages (clearly contradictory goals). <i>Attack</i> her on this; Warren's position here is irrational and indefensible.<br /><br />MylesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-17665099897657779582011-05-15T10:20:41.677-05:002011-05-15T10:20:41.677-05:00That's great stuff--classic McMegan. All her o...That's great stuff--classic McMegan. All her old arguments, as you say, which are incredibly weak but people believe what they want to believe. It's not necessary to present a winning argument, any old thing will do so the faithful can ignore what they want to ignore. <br /><br />McArdle doesn't read the material because she doesn't have to. Arguments based on evidence are so last century.<br /><br />Look at Velshi--he instinctively (or maybe deliberately) tried to paint Taibbi as a slightly obsessed moral scold. He sure didn't ask McArdle if she read the documents.<br /><br />I hope to have more on this later.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-88277188389958304912011-05-15T10:02:37.026-05:002011-05-15T10:02:37.026-05:00OT, but I just caught the Taibbi-McArdle smackdow...OT, but I just caught the Taibbi-McArdle smackdown at Tbogg’s place (http://tbogg.firedoglake.com/2011/05/14/mcbambi-vs-taibbzilla/), and my mind is further boggled by McArdle’s career ascent. She is woefully unprofessional: a serious lack of preparation, a shifty-eyed demeanor, and a distractingly unattractive hairstyle.<br /><br />She doesn’t do research, so she is left with only the most threadbare of arguments. Of course, Goldman Sachs ripped off their clients – every seller does! She accepts a second-hand report that GS did do proper disclosure; Taibbi, who actually read the pertinent documents, says no they didn’t. Who should the audience believe? She finally falls back on her classic assertion that everything is very complicated, so no one can really understand it. <br /><br />Anyone in the public eye knows that you need to look at the camera, not off to the side as if at a shiny object, and not have your hair hanging limply in your face. I’m not elevating style over substance; it’s called engaging the audience. This is basic advice she should have gotten in any class where she had to make a presentation, but then I’m assuming she paid attention in school.Rugosanoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-21160856478217556342011-05-15T09:22:22.026-05:002011-05-15T09:22:22.026-05:00How many people with 30 year mortgages actually ho...How many people with 30 year mortgages actually hold them for 30 years? Perhaps Wells Fargo has some data about this and that's why it's willing to issue 30 year mortgages.<br /><br />EmilyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-5277072287404123312011-05-14T23:54:18.892-05:002011-05-14T23:54:18.892-05:004.5% seems like a good rate of return.
No it'...<i>4.5% seems like a good rate of return.</i><br /><br />No it's not, if you are locked into it for <i>thirty years</i>.<br /><br />There is just literally no way that the inflation rate over the 30-year horizon is predictable to an extent that you'd be willing to offer sub-5% rate mortgages on them, especially given default risk. There's a name for people who make such bets: <i>idiots</i>. <i>Anything</i> could happen in 30 years; we could have a short spate of high inflation at some point in that timeframe.<br /><br />If I were running Wells Fargo, the first thing I would do is impose (to the extent legally possible) an absolute moratorium on any consumer-market mortgages with terms fixed for more than 5 years. The amount of reckless risk-taking implicit in such a loan is just astounding.<br /><br /><i>I'm getting something like .0003%</i><br /><br />The right comparison isn't an at-will savings account, it's the same long-dated CD. There actually aren't 30-year CD's, so no comparison can be made. Would you be willing to put your money in deposit for 30-year <i>fixed</i> at 4% fixed?<br /><br />MylesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-13660899022248419702011-05-14T21:55:23.197-05:002011-05-14T21:55:23.197-05:004.5% seems like a good rate of return. I wish I we...4.5% seems like a good rate of return. I wish I were getting that on my Savings Account at WF. I'm getting something like .0003%<br /><br />I am quite sure Wells Fargo is making money on honest loans.Kathyhttps://www.blogger.com/profile/03176801494652946278noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-85082534939339065392011-05-14T21:36:38.433-05:002011-05-14T21:36:38.433-05:00Here's the Wells Fargo current rates page:
ht...Here's the Wells Fargo current rates page:<br /><br />https://www.wellsfargo.com/mortgage/rates/<br /><br />Honestly take a look. A regular 30-year fixed is at 4.625%. A FHA 30-year fixed is at <i>4.5%</i>.<br /><br />That's actually mind-blowing. I can bet dollars to donuts that Wells Fargo will never make a single penny on any of their 30-year fixeds issued on this date today, if they are actually writing long-dated mortgages with 4.625% rates.<br /><br />MylesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-28835592226814996972011-05-14T21:28:38.072-05:002011-05-14T21:28:38.072-05:00Yet--strangely--the Canadian banking system did no...<i>Yet--strangely--the Canadian banking system did not crash as ours did. I wonder why.</i><br /><br />It also doesn't allow for things like 30-year fixed rate mortgages, which people like Elizabeth Warren are pushing (as a 'plain vanilla' mortgage option). The Canadian system in fact doesn't allow for, in practical terms, fixed rate terms of more than 5 years.<br /><br />I mean, of course, if such things like 30-year fixed rates are available (the amount of free money implicit in such an arrangement is just mind-boggling, which is why I find it so puzzling that people like Elizabeth Warren are endorsing it), by all means take advantage of it.<br /><br />MylesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-46359996753113052832011-05-14T19:45:04.342-05:002011-05-14T19:45:04.342-05:00There's no need to feel embarrassed at all. Th...There's no need to feel embarrassed at all. This mess is affecting all of us and it's very upsetting.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-21725964731498144942011-05-14T19:40:52.949-05:002011-05-14T19:40:52.949-05:00Well, I was embarrassed about writing about person...Well, I was embarrassed about writing about personal problems here. Sorry! -KwillowKathyhttps://www.blogger.com/profile/03176801494652946278noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-34601442408216437942011-05-14T13:03:44.263-05:002011-05-14T13:03:44.263-05:00Yet--strangely--the Canadian banking system did no...Yet--strangely--the Canadian banking system did not crash as ours did. I wonder why.<br /><br />People do recoup improvement costs if the market goes up, and meanwhile they enjoy those improvements.<br /><br />I have seen housing prices rise and fall with the economy. In the 80s we had a boom and bust in which the wealthy areas lost some value but regained it when the economy improved. The suburbs lost a great deal of value and recovered some in the next boom. <br /><br />I have no idea what will happen in the future, except that gas will get more expensive. McArdle's problem is not that her house is losing value; it will probably make her money in the end, as long as she isn't forced to sell fairly soon. Her problem is that she sees money as a sign of intelligence and self-worth, so watching the market go down drives her crazy. Which is very amusing.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-65183622107969112992011-05-14T12:59:41.986-05:002011-05-14T12:59:41.986-05:00"Should be bloviating not blockading..."...<i>"Should be bloviating not blockading..."</i><br /><br />Blockading works. As in, Myles just set up a b.s. blockade with five posts in a row.atatnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-74350794587547573812011-05-14T12:38:32.842-05:002011-05-14T12:38:32.842-05:00Myles you really need to stop blockading about stu...<i>Myles you really need to stop blockading about stuff you know nothing about. The old part of town has better schools and a better tax base. Schools are a sign of good tax base and places eightfold schools did not lose value like other places. If Keillor improved their property with cold hard cash renovations but can't recoup that money at the sale that's a loss that can't be made up when they buy into a new area.</i><br /><br />But that's a completely sunk cost. If they can't recoup the improvements now they can't recoup the improvements ever. It's just that the numbers <i>look</i> worse now.<br /><br />Also, if the area lost value more quickly than the schools part of the town, then in the long-term it's better to bail out and get equity in an area with less downward potential.<br /><br /><i>In addition they will be able to afford less house and the housing stock</i><br /><br />True enough. But also, they have no debt in what is right now a insanely low-interest rate environment. If you can lock in the low interest, an mortgage right now really is <i>free money</i>, counterintuitive as might sound. (My home's in Canada, where this feature is sadly unavailable due to the banking oligopoly.)Mylesnoreply@blogger.com