Instead they saved up almost all of their foreclosed properties for four years. Then, after prices had tumbled by 30%, banks then offered them up for sale all at once and the market took an even larger dive.
My friend, it's only been 2 years since the sub-prime bubble popped (August 2007). So I guess you'll need to explain how you're getting 4 years.
Also, I think you just made my point. Having the banks offer all of this toxic stuff "all at once" does nothing but crash the market even more, forcing what HAD BEEN performing loans on homes with positive loan to value, to go negative. And now those folks with negative LTV are walking away or refusing to pay their mortgage.
So I can only imagine how much worse it would would be if we don't find a way to maintain equilibrium between supply and demand. You have NO IDEA (nor do I) what the economic fallout would be were your course of firesale liquidation pursued. It's quite possible it would only exacerbate the unemployment problem to a far greater extent, and also have even more people choosing not to pay their mortgage (increasing supply of REO property that the banks have to unload).
Now I know you're one of those people who seem to think that no one should own a home unless they can pay cash for it, but that's just not the reality. How many people out here can honestly say they can afford to pay cash for their home? You'd much rather see all of this country's RE in the hands of the capitalist power elite, receiving rent from the masses.
Also, I know you'd rather see a banking system not based upon a fractional reserve lending basis, but that's not the reality. Even a one to one deposit to loan ratio would not prevent a bank run and depositors stuffing money in their mattresses. Only FEDERAL (read "socialist) Deposit Insurance Corporation stifles such "animal spirits".
And guess what, even if we had a gold based currency system, all that has to happen is for people to take possession of their gold and those banks would be in trouble just the same.
And while lending standards need to be toughened, it will not deal with the issues related to foreign capital flooding into this country as a result of a trade deficit. And it was that foreign capital, combined with low interest rates (due to that surplus of capital), and fraud on the part of loan originators trying to find a place to park that capital, that fueled this real estate bubble.
What are you to do, if you're a banker and you have hundreds of billions in foreign capital looking to be lent out? Do you just say "no" and send them on their way over to your competitor? Or do the Feds step in (socialism) and insure that lending regulations and standards are adhered to, despite the surplus of capital?
The answer, in part, to this problem is the demand side. And that's not going to be resolved until unemployment is dealt with and consumer confidence is restored. There will be NO RECOVERY IN REAL ESTATE until people have the confidence to buy a home. And they won't have that confidence until they feel they have secure employment. Give them that secure employment and they will step forward and take on long-term debt obligations with the expectation that their property values will be greater 30 years from now than current prices.
As it stands now, the only demand for Real Estate is from those very wealthy "vulture capitalists" looking to create a panic based collapse in Real Estate prices so they can buy the crash and then sell, or rent those same properties.
,i>The heavily indebted like yourself will always imagine there's some scheme which will certainly prop the market up at artificial levels, but they always fail.
You're being rather presumptuous and showing your ignorance. I'm debt free, as is my mother. That was the first thing I did as executor of my father's estate upon his death this summer.
So I really don't have a dog in this fight, except to recognize that main street is more important than Wall St. Wall St. did their upmost to create to problem and now it's incumbent to protect main street from the fall out of your free-wheeling capitalist system of practically unregulated securitized MBS, and completely unregulated "bucket shop" CDS markets.
You want to see the result of your "free trade" form of capitalism, look no further than the CDS markets. That too, I predict, is destined to come under severe regulation, as it should.
Hawk |
