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Limits of Transparency


If lawyers and MBAs don’t understand their mortgage documents, what chance do the rest of us have?

Whites 5 Times Richer Than Blacks


After reading a Guardian story is headined “A $95,000 question: why are whites five times richer than blacks in the US?” I still don’t know. A typical white family is now five times richer than its African-American counterpart of the same class, according to a report released today by Brandeis University in Massachusetts. White families […]

Housing as an Investment


The recent bursting of the housing bubble has made people think twice about the old notion of buying a house as an investment.  Felix Samon argues that it’s almost never a good idea. Real estate is pretty much never a good investment in a down market, no matter how granular and detailed your local knowledge […]

Breaking: Homeless Have No Homes


An odd feature at NYT reports that homeless shelters are seeing a rise in former home owners who were foreclosed on. Only three years ago, foreclosure was rarely a factor in how people became homeless. But among the homeless people that social service agencies have helped over the last year, an average of 10 percent […]

Some More Numbers on the Geithner Plan


Were you wondering if yesterday’s big rally was related to the Geithner plan? Well, it probably was. The Treasury helpfully provides an example, which I reproduce here: Step 1: If a bank has a pool of residential mortgages with $100 face value that it is seeking to divest, the bank would approach the FDIC. Step […]

Why Small Things Get Big Attention


Steven Taylor makes a point I made on Wednesday’s edition of OTB Radio (“AIG Bonus Brouhaha“) about why seemingly minor matters resonate with the public while major issues often don’t. [W]hile broad and complicated policy may not fully register in the minds of the public, a smaller, specific and easier to understand action can capture […]

Renogiating Mortages


Eric Posner has a Slate piece offering a novel plan for “renegotiat[ing] all those bad loans at no cost to the taxpayer.” The solution to this problem is for the government to force renegotiations to occur. A simple plan could do this. The plan would give all homeowners who live in a ZIP code where […]

Obama’s Secret Plan: Inflation?


Michael Kinsley has a rather rambling column about the “upside-down economics” of the stimulus plan that’s subtitled (or, whatever one calls the SEO-driven title tag that appears at the top of the browser and in search results) “Recession Economics – How Do We Repay the Stimulus Spree?” But even if the stimulus is a magnificent […]

Housing Affordability at All-Time High


Ezra Klein is a bit bemused: In a further signal that economic indices have a taste for irony, an index released by the National Association of Realtors shows that housing affordability was at an all-time high in December. A family earning the median income has 158.8 percent of the income needed to qualify for the […]

Defaulting Homeowners Default Again After Relief


Roughly three in five people who got bailed after failing to pay back home loans are back in trouble in short order according to a shocking government report.  (Well, shocking to government officials.  Otherwise, entirely predictable.) Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on […]

Lehman Brothers: Who Gets Hurt?

Lehman Brothers

Matt Yglesias snarks, Unlike the guy who runs Lehman Brothers, the guys who clean the bathrooms in the Lehman Brothers office have, as best one can tell, been doing an excellent job. And yet if the company going under results in everyone involved losing their jobs, the guy who runs Lehman will wind up being […]

The ‘Too Big to Fail’ Problem


Now that Freddie Mac and Fannie Mae have joined the “too big to fail” club, isn’t it high time we started thinking about how to avoid allowing companies and other quasi-private agencies to get into these problems in the first place? It seems that over the past few decades, the Federal government has pretty much […]

Fannie Mae and Freddie Mac Bailout Debacle

Freddie Mac and Fannie Mae Logo

The widespread rumors of a government bailout of Fannie Mae and Freddie Mac have already had dramatic consequences, perhaps creating a self-fulfilling prophecy. Iain Dey and Dominic Rushe, writing for The Times of London, note that, “The two companies lost almost half their market value last week as rumours of a government bail-out swept the […]

Obama’s ‘Sweetheart’ Home Loan


The Manufactured Outrage of the Day comes to us from Joe Stephens and his page A3 piece for today’s Washington Post, “Obama Got Discount on Home Loan.” Shortly after joining the U.S. Senate and while enjoying a surge in income, Barack Obama bought a $1.65 million restored Georgian mansion in an upscale Chicago neighborhood. To […]

Subsidizing Home Ownership

Subsidizing Home Ownership

Ezra Klein jumps on a growing meme the home ownership isn’t all it’s cracked up to be and that the government should stop subsidizing it. He points to Paul Krugman, who argues in today’s NYT that it’s time to rethink our decades-long bipartisan consensus that home ownership should be encouraged. While everyone stresses the advantages […]

Getting to Know Obama

Barack Obama and Jim Johnson Photo

Howard Fineman thinks we have learned a lot about Barack Obama from the Jim Johnson incident. We know John McCain: as formed and familiar as a well-worn boot. But we don’t know Barack Obama very well, and getting to know him has been and remains the basic national task of 2008. With less than five […]

Chrysler Cashflow Crisis


Frank Williams reports that Chrysler is having serious cashflow problems and has taken a novel approach to dealing with it: “Chrysler will now be taking five percent off all [purchase orders] PO’s and will take 60 days to pay instead of 45.” This applies “to all existing orders, not just future orders.” I would love […]

President of the United States: Chief Job Placement Official


It’s not change when he offers four more years of Bush economic policies that have failed to create well-paying jobs,… –Barack Obama, Remarks of Senator Barack Obama: Final Primary Night I heard that and the first thought that went through my head was, “Since when did the President of the United States become in charge […]

ABC News Debate Focuses on ‘News’

ABC News Debate Focuses on 'News'

ABC News hosted the Democratic debate in Philadelphia last night, with anchors Charles Gibson and George Stephanopolous asking the questions. Shockingly, they selected questions on the basis of what they’ve been covering in recent days, namely Bittergate, patriotism, various campaign faux pas and countercharges, and so forth. This has pretty much everybody except David Brooks […]

Economic Hysteria


Alan Reynolds over at the Cato Institute puts the current financial crisis into perspective, and notes that the current financial crisis isn’t nearly as a bad as many people seem to thing. Media hysteria over the mortgage crisis is almost certainly misleading countless people about prospects for the real economy. The US economy is likely […]

McCain the Interventionist


I’ve long thought that American politics and the fact that we have an activist/interventionist government when it comes to economic policy leads to a race to see who can pander the most to voters, or at least a sub-class of voters. John McCain’s new “plan” to bail out the greedy and stupid when it comes […]

Recession, Depression, or Neither?

Recession, Depression, or Neither?

There’s no doubt that the U.S. economy is in a downturn. The cost of petroleum has skyrocketed, creating all manner of ripple effects throughout the economy. The “housing bubble” has burst in several cities and the sub-prime mortgage industry has gone bust, leaving many people upside down in their houses or facing — or experiencing […]

Buyers Trashing Houses After Foreclosure


A “significant” number of people are willfully destroying their homes before complying with eviction notices as a means of exacting “revenge” on banks for foreclosing on them. This, in turn, has created a black market cottage industry where bankers bribe people with cash payments for leaving peaceably. Megan McArdle doesn’t understand the pointless destruction, observing […]

How Clinton Could Win

Gallup Democrats 24 March 2008

Adam Nagourney offers a “bruising scenario” by which Hillary Clinton could still pull out the Democratic nomination. It’s not a particularly novel one; indeed, it’s the one that Clinton has been banking on for weeks: the superdelegates put her over the top. There are about 800 of them, and they are going be weighing two […]

ARMs for the Rich


The NYT informs us today that, “The Affluent, Too, Couldn’t Resist Adjustable Rates.” They took out adjustable-rate mortgages at the peak of the housing bubble to buy homes they would otherwise not be able to afford. Or they refinanced existing mortgages to take cash out. And now, two or three years later, the day of […]

George McGovern Now Conservative?

George McGovern Now Conservative?

It’s been occasionally remarked in recent years that George McGovern, who lost the 1972 election to Richard Nixon in a landslide because he was so ultra-liberal, became more conservative after leaving public life and starting his own business. A column in today’s WSJ, “Freedom Means Responsibility,” will certainly add another log to that fire. His […]

Barack Obama Protecting the Stupid People From Themselves


I was reading about Senator Obama’s economic policy and once again something jumped out at me. *Protecting Homeowners: Obama has proposed a fund to offer direct relief to victims of mortgage fraud and would ease the burden on struggling homeowners by offering a tax credit to low- and middle-income Americans that would cover ten percent […]

Was There a Housing Bubble?

Housing Bubble Graph

Alex Tabarrok has generated quite a buzz over his suggestion that the “housing bubble” might be a myth. He begins with this graph of housing prices from Robert Shiller published in the NYT: The clear implication of the chart is that normal prices are around an index value of 110, the value that reigned for […]

Where Did Hillary Get $5 Million?

Where Did Hillary Get $5 Million?

Mark Hosenball and Michael Isikoff ask and answer an interesting question: “Where did Hillary Clinton get the money for her $5 million loan to her campaign?” Clinton, unlike rival Barack Obama, has not released her tax returns. But disclosure forms that Clinton filed with the Senate provide some clues to her family finances. They show […]

Who Will Edwards’ Voters Support?


Dana Goldstein has a timely piece in the American Prospect regarding the composition of John Edwards’ supporters, which might help to answer the question of whether Obama or Clinton will gain by his depature from the race: Intuitively, it makes sense that Edwards supporters would trend toward Obama. Both candidates ran as the anti-Clinton. Edwards […]

A Question of Stimulus


Now that the stimulus package has passed, as James noted below, the conventional wisdom, as we discussed yesterday on OTB Radio, seems to be that this stimulus package won’t actually stimulate the economy at all. The thinking here goes to the effect that the economic stimulus comes when people say, “Cool, an extra 600 bucks! […]

Mortgage Companies to Freeze ‘Teaser’ Rates

Mortgage Companies to Freeze 'Teaser' Rates

The Bush administration has strong-armed mortgage companies into freezing teaser rates on old loans. The Bush administration has come up with a plan to help strapped homeowners facing a daunting jump in their monthly mortgage payments. The proposal, reached in negotiations led by Treasury Secretary Henry Paulson with the mortgage industry, would freeze introductory “teaser” […]

Obama Raising Money, Not Poll Numbers


Barack Obama is a “rock star” and is raising nearly as much money as Hillary Clinton and is spending more money on advertising in Iowa, yet he’s losing ground in the polls. LAT staffer Robin Abcarian wonders how that could be. Everywhere he goes, Obama gets a Hutton Street-style welcome. Crowds coo, strain to shake […]

Income and Voting

Voting Trends by Income Chart

Paul Krugman provides a spreadsheet showing that, as family income rises, so does the tendency to vote Republican. As of the 2004 election, Democrats won handily among voters in households with incomes under $30,000 a year and Republicans won among those with households of $50,000 and higher; the $30,000-$49,999 bracket is essentially a wash, with […]

Recession Fears


Well by now most of you have probably heard about the rather dismal jobs numbers from the BLS. The establishment survey indicates that 4,000 jobs were lost last month and made a major downward revision to July’s job numbers. Initially, July was reported at 92,000 jobs, but now the BLS is putting that number at […]

John Edwards Accidentally Made Millions from Katrina Victim Abusing Subprime Lenders


WSJ’s Christopher Cooper reports on what appears to be serious hypocrisy on John Edwards’ part: As a presidential candidate, Democrat John Edwards has regularly attacked subprime lenders, particularly those that have filed foreclosure suits against victims of Hurricane Katrina. But as an investor, Mr. Edwards has ties to lenders foreclosing on Katrina victims. The Wall […]

Stock Market Roller Coaster


The stock market provided quite a roller coaster ride today. The Dow Jones Industrial Average dropped 300 points, recouped a large portion of that loss, then lost what was recouped, only to rally at the end of the day and close down about 55 points. I’m sure that part of the reason for todays wild […]

Does the Housing Market Matter?


The recent turmoil on Wall Street has been linked to turmoil in the housing market, namely the serious problems in the subprime market. Over at Tech Central Station, Desmond Lachman argues why people who ignore the housing markets potential impact on the economy do so at their own risk. Wall Street optimists minimize the bursting […]

Dow Plunges 387 Points on Subprime Fears


The Dow fell 387 points today amid mounting fears in regards to subprime loans in the housing market. Wall Street plunged again Thursday after a French bank said it was freezing three funds that invested in U.S. subprime mortgages because it was unable to properly value their assets. The Dow Jones industrials extended its series […]

Caption Contest Winners


The Mobius House Edition OTB Caption ContestTM is now over.

Should You Worry About Sub-Prime Mortgages?


The housing market really isn’t my thing, but James Hamilton does have a pretty good post that looks at a potential problem with sub-prime loans. Still, you are interested in such things, head on over and check out that post. Here is the main conclusion, The ultimate discipline, then, must come from these final holders […]

Is It Better to Buy or Rent Your Home?


David Leonhardt observes that, contrary to the hype from real-estate agents, it probably doesn’t make sense to buy a house right now unless you intend to remain in it for a long time. With the spring moving season under way, The New York Times has done an analysis of buying vs. renting in every major […]

Housing Bubble Bursting for Alt-A’s?

Fester warns that, just when you thought that the bursting of the housing bubble was confined to those who took on risky “sub-prime” loans, news comes out that there may be a problem with with the “Alternative A” or “Alt-A” loans, which “account for about 21 percent of loans outstanding and 39 percent of mortgages […]

10 Reasons You Aren’t Rich


Jeffrey Strain explains that, “The reason why you aren’t a millionaire (or on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money, but the truth is that for most people, whether or not you become a millionaire has very little to do with the amount […]

Houses Cheaper than Cars in Detroit


You can buy a house in Detroit for $4000! It’ll be a fixer-upper, though. As Detroit reels from job losses in the U.S. auto industry, the depressed city has emerged as a boomtown in one area: foreclosed property. It also stands as a case study in the economic pain from a housing bust as analysts […]

Mortgage Late Payments, Defaults at All Time Highs


Not good news for the economy. A drop in consumer spending could be quite bad news for the economy and future growth. WASHINGTON – Late mortgage payments shot up to a 3 1/2-year high in the final quarter of last year and new foreclosures surged to record levels as borrowers with tarnished credit histories had […]

Subprime Borrowers

A little earlier today James posted on the problems that subprime lenders are experiencing and there was a comment on that post to the effect that people who bought older homes were more likely to be “subprime borrowers” than those who bought “McMansions” and that got me to thinking. That’s not my intuition. My intuition […]

Crisis in Home Mortgage Market?


It appears that the long-forecast burst of the housing bubble may be upon us, as several companies who made risky home mortgage loans are in trouble. Hanging in the balance is the nation’s housing market, which has been a big driver of the economy. Fewer lenders means many potential homebuyers will find it more difficult […]

News Business is a Business


Austin Cline laments the fact that the news media is giving an “undeservedly large amount of attention” to the death of Anna Nichole Smith and the ensuing legal wrangling and to trivial matters such as Britney Spears’ decision to shave her head. While our politics are virtually 180 degrees apart, we agree on the relative […]

Bush’s Health Care Plan


Greg Mankiw and Arnold Kling discuss Bush’s health care proposal. Bush’s health-care proposal would use tax breaks to make it easier for people who do not have employer-provided health insurance to buy coverage on their own. The tax incentives would be similar to deductions used by homeowners for the interest on their mortgages, Bush said. […]

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