Everyone’s favorite word- trillion:
The International Monetary Fund said losses stemming from the U.S. mortgage crisis may approach $1 trillion, citing a “collective failure” to predict the breadth of the crisis.
Falling U.S. house prices and rising delinquencies may lead to $565 billion in mortgage-market losses, the IMF said in its annual Global Financial Stability report, released today in Washington. Total losses, including the securities tied to commercial real estate and loans to consumers and companies, may reach $945 billion, the fund said.
Via Calculated Risk, where we also learn that regulators are getting scared:
“We’ve got a real problem. And I do think we need to have more activist approaches. And I think it will be something we need to be honest with the American public about. We do need more intervention. It probably will cost some money.”
We are so fucked.
DougJ
You’ve really become a gloom-monger since you switched sides. The fundamentals of our economy are strong. All this is the after-effects of the Clinton years.
Dennis - SGMM
Not to worry; the government will just print up a trillion dollars. Hell, make it two trillion. The fact that it will soon take a wheelbarrow full of those dollars for a tank of gas, or a shopping bag full of them to buy a loaf of bread shouldn’t bother any of us.
Xenos
Total losses, including all those leveraged securities, will be less than 2X of the losses in the mortgages themselves? That actually sounds pretty optimistic to me.
They are a bit unclear as to where in the industry the losses are stemming from. This goes beyond sub-prime’ doesn’t it?
jake
Gee, do you think that this time “activist approaches” and “intervention” will mean fining the shit out of crooks and throwing them in jail?
Yeah I know, stupid question.
Funny how the sAdministration that issues an OMG Code Brown terror alert every time Skeletor Chertoff gets gas has managed to keep real quiet while this disaster rolls unfolds.
Punchy
FAIL. Election year. If you think the Bush Admin is going to admit to any of this (ever, but especially 7 months away from elections), you’ve got much better drugs than I.
Dork
Just think of how all those wheelbarrow purchases will prop up the economy!!
rob!
Ted Turner said that in about ten years we’ll be resorting to cannibalism due to food shortages, so for my part I’m trying to lose weight so i appear less yummy and, conversely, am able to run away faster and for greater distances.
Rick Taylor
Everything was just fine until the Democrats took over congress. We should call this the Pelosi-depression.
Gus
Rick Taylor, you are aware that this argument has been made by the short bus riders at RedState, right?
DBrown
Normally, it is good to have an opposite opinion – clears the air but you must be an extreme nutcase if you blame Cliton for buswhack-bloody-hands-cheney & gang stupidity
J.A.F. Rusty Shackleford
Yes he is and that’s part of the fun.
J.A.F. Rusty Shackleford
Wow – a Spoof Lord and a Spoof Master in the same thread!
DougJ
So says the latte-sipper as he bangs his hand against his marble countertop.
The Other Steve
When they’re saying $1 trillion in losses… are they talking about real losses, or just on paper?
like my house has dropped about $30k in value. Is that part of the loss, even though I’m not selling it therefore will not be realizing that loss?
Although if that is the case I think $1 trillion seems a bit low.
Rick Taylor
Nope, but I can’t say I’m surprised. These people are impossible to parody.
J. Michael Neal
They’re talking real losses from financial companies. The paper losses on home values will probably be $5-$6 trillion.
Xenos
As the old tongue-twister goes:
How much inflation must an inflation-monger monger,
to beat back 6 trillion dollars of deflation?
That does not quite scan, but I will work on it a bit more…
Dennis - SGMM
Don’t even think about requiring more reserves for investment banks, shut up about transparency, and if you mention regulation we’ll shoot you in the face. Just send the fucking money. This is a free market: we’re free to run it however we damned please and you’re free to make us whole when we fuck up. Get it, chumps?
Ted
Go Shopping!
gypsy howell
Boy, these Wall Street Free Market douchebags are all for “activist approaches” and “more intervention” costing “some [taxpayer] money” when it comes to bailing THEIR asses out.
Let us not confuse this with helping the average American workin’ slob.
No sir, right after we bail them out of this mess, they’ll be right back to screeching “Free markets! Deregulation! Privatize Everything! No Government Handouts for the Poor!” without even blinking an eye.
Ryan S.
I’ve felt that way since about 2000.
I just have to laugh at the idiocy of the economic commentators that suggest that the housing market is poisoning/spreading to other sectors of the economy. Why can’t people realize that real estate/ landownership has been the bedrock that all economies, since the dawn of civilization, have been founded on. Any changes, either up or down, in this market should always be taken as a very dangerous sign.
Z
Deregulation! Whee! Its a long plunge to the bottom of this roller coaster!
ThatLeftTurnInABQ
Step 1: We’re all sub-prime now.
Step 2: We’re all tax-n-spend libruls now. Throw money at the problem in the blind hope it will go away.
Step 3: Rebrand the currency – the penny is now your “Greenspan dollar”.
Step ??: Profits! Profits?? Anybody?
Will the last Goldwater conservative please turn out the lights when they leave.
Eric S
Nah, no wheelbarrows. We just make bigger notes.
les
I think Zimbabwe may have some helpful pointers for us in this circumstance.
Andrew
I want my 50,000,000,000 dollar bill.
The Populist
She’s right. We DO need to take an activist approach to this.
If a homeowner needs help, HELP them BUT attach rules to the deal. They can’t flip it, they have to live in it (and have been living in it) and IF they do sell, they are on the hook to pay back the gov’t any share of profits.
We cannot allow major banks to fail. Like it or not, clueless deregulation of the loan companies CAUSED this mess so the politicians need to explain to everybody that we need to do this. Not doing so causes stress from the financial system on down to neighbors and neighborhoods.
The invisible hand of the market isn’t gonna fix this mess. It will unfortunately take tax dollars. Doing nothing is something we cannot accept or else WE ALL suffer.
Remember, it’s not the sub prime moron who is the cause of this. It’s prime loans as well. People got swept up in this nonsense and put aside their common sense so they can join the ranks of “homeowners.” I dunno…I can’t accept doing nothing. We can’t bail out the banks without bailing out underwater homeowners who want to stay in their homes.
Fledermaus
Nobody could have anticipated that making a bunch of complicated, expensive loans without checking on the ability of the borrower to pay it back would cause problems down the road.
The Populist
Uhhh, what is a tax & spend liberal? I really need to understand why people on the right insist on using that stupid term?
So if a liberal is “tax and spend” what does that make a conservative Republican? Seems to me the last dem to serve in the white house left us a balanced budget. What happened? Oh yes, another pro trickle down jerk off spent it all and then put the rest on our collective credit cards.
Argh. Stop already with that crap. The right and left are one and the same YET the dems seem to do better at not spending us into oblivion.
This rant brought to you by a former Republican.
The Populist
Fledermaus,
Fair Isaac and the appraisal agencies are as much to blame as the dumb lenders.
Had Bush not given the store away to the mortgage industry, I believe this avoidable mess would have been a fixable problem.
ThatLeftTurnInABQ
In the comments secion of the calculatedrisk thread which John linked to, CR forecasts real losses of 4-6 trillion:
I believe “household wealth” = me and thee. Not paper losses but less food on the table, less medical care, no more buying HD televisions and other manufactured goods, disconnect the cable TV (sorry Spongebob!), no more DSL or broadband service (use the public library if you need an internet connection), etc., etc.
Basically get ready to sit at home in the dark and pay down your credit cards. Chess and card games are looking good for entertainment, at least during the summer time when it stays light longer. I predict that camping in the National Forests will enjoy a surge in popularity as a vacation destination.
The Populist
Gypsy,
The deal should be…HELP the homeowners who need help (and want to keep their house) and that should help the banks and lenders as well. In return these dumbass lenders should be forced to be regulated forever. The minute Clinton deregulated the banks, I knew the shit would hit the fan.
The Populist
That Left Turn,
I doubt it will come to that. What WILL happen is that more people will spend less (given) and I bet that we see some deflation in areas such as Cable TV, etc when demand drops.
The Populist
If America elects McCain regardless of the baggage some think Obama carries and many KNOW that Hillary has then we deserve to live in the dark stressing about how to feed our families.
Sorry to be a jerk, but it’s time for change. Sure, a President can only do so much but it’s time to hold those in Congress accountable for voting to destroy this country’s wealth so a few rich people can have their useless tax breaks.
ThatLeftTurnInABQ
Sorry Populist, I forgot to add my /snark tags when I used that term.
Yesterday’s “tax and spend liberal” = today’s fiscal conservative, at least by comparison with the GOP. That was why I made a wisecrack about the Goldwater conservatives.
Problem is, tomorrow’s fiscal conservative policy would be better summed up as “Tax and tax and tax some more, with very little spend”. What fraction of the federal budget do you think will be devoted to debt service and paydown costs, once rates adjust because nobody wants to buy our T-bills for cost plus a smile and a handshake any more? I’m guessing it will top off at about 40 percent, before we get this monster under control.
Keifus
So if a liberal is “tax and spend” what does that make a conservative Republican?
I’ve been going with “borrow and spend” for a while now, which is partly true, but it obscures where the spending goes.
D-Chance.
Eh, so “we are so fucked”. It was a masturbatory act… we did it to ourselves. We maxed out our own credit cards because we NEEDED that second SUV. We overextended because our kids NEEDED that $4000 computer AND that $700 gaming system (and the $1000+ worth of extra games). We overspent, but we NEEDED the 60″ plasma screen. We signed our lives away; but we NEEDED that 5000 square foot “cottage” in the nice new gated subdivision with its five bedrooms, four baths, travertine tile, granite countertops, stainless steel kitchen (where we eat all out takeout meals), four-car garage, and 1200 square foot “guest house”.
We ARE so fucked. And in assigning blame, I’d suggest all of us get up from our computers and go to the nearest mirror. We’ve been a consumerist society sold on excess and the belief that “we deserve it all, and we deserve it NOW”. That chicken is now entering the pen and ready to roost.
HyperIon
wow! that sounds AWFUL. will life actually be worth living then?
yes, i snipped out the more important deprivations in your list but what i left in above completely captures the pampered lifestyle we have been leading lately.
so is it fair that folks who did not re-fi repeatedly are going to suffer lifestyle changes due to the very poor choices made by some? no, it isn’t fair. but at least there is fat in many americans’ budget: ipod, cell phone and its custom ring tone, latte, cars for the kids, music lessons, game console, gym membership, year abroad in college, ski tickets, clothes with designer logos, season tickets to the opera or sports events. all of these things can go AND still we will be materially better off than 98% of those living today and 99.99% of those who have lived ever.
maybe families sitting down to dinner together will make a comeback.
HyperIon
i see that D-Chance. beat me to the rant.
Perry Como
Indeed.
Splitting Image
“We are so fucked.”
Nonsense. People still think that the Great Depression was all about the stock market crash. It wasn’t. It was about the Crash coupled with multiple droughts in the midwest that sent food prices soaring at the exact time all the fake wealth disappeared.
Our food supplies are fine. There would have to be massive climate changes afoot to bring about a long series of droughts; the only way that any kind of blight could hurt us on a national level is if we depended on a small number of staple crops for food, and even then we would have had to spend years cross-pollinating them to produce that kind of homogeneity; and not only that, you would have to imagine that fuel prices were suddenly going to make it a lot more expensive to transport food from A to B, or that people were planning to divert crops from the food supply for some new-fangled technology that’s somehow more important.
So until there is some evidence of any of that, I wouldn’t go telling everyone they’re “fucked” because of a simple market correction.
ThatLeftTurnInABQ
Hyperlon,
Thanks, I’m glad somebody picked up on that, I was afraid that I might have been too subtle in my sarcasm. A lot of the “overhang” we face is the end of a pampered childhood (the Boomers? self-pampered? who would have thunk?).
The nasty part is that our collective cutbacks won’t be distributed in an even or remotely fair manner. For some people no more SpongeBob, for others less food and medicine, or worse. It sucks to be in group #2.
Walker
That’s not exactly true, though that did make things worse. It was all about the bank failures and debt deflation. The stock market caused some of that. But so did the 1926 housing boom (and bust) whose size was comparable to the current one. People were over leveraged in many different areas (mortgages, stocks, businesses). Because of the way leverage works, when these crashed, people did not loose just wait they paid; they lost many, many times more, putting them in crushing debt that cause the next wave of failures.
Much like what is happening right now. How the debt deflation is caused (food prices, wignut futures, etc.) is irrelevant. At the end of the day that is all that matters. This is not a simple market correction.
As for food prices, have you been paying attention lately?
Fledermaus
I could be totally off base on this one but I think inflated apprasials were the exception rather than the rule. It would seem difficult to price a house that is rarely sold, so I think they also rely on recent sales prices in the area. A couple of developers overpay for for a few houses to knock down and turn into condos and all of a sudden everyone’s house price in the area jumps up. So a few more sell for an even higher price and on and on until it ends.
jake
That’s a great euphemism for cannibalism.
Conservatively Liberal
My wife and I do not use credit for anything. We use MasterCard Debit (our own money). The newest car we have is a 1989 Olds Cutlass Calais, the second is a 1978 Ford Mustang, and we have a 1980 Yamaha XS850SG motorcycle. The vehicles are kept in top shape and condition. I have built our home computers, and the hardware is fast but out of date P4-HT/i865 systems. We do not have a Wii, Playstation or X-box (or any gaming console for that matter, we use our computers). Our TV is a 10+ year old 27 inch Toshiba. We rent a three bedroom house with a one car garage as we have been saving for a home (and watching prices skyrocket did not convince us that ‘now!’ was the time to buy).
We are not the only ones who have lived within our means (and even saved money), yet we too are just as fucked as everyone else who will have to pay for this. I can tell you right now that the last damn thing I will do is look in a mirror and blame myself or my wife and kids. I am a cheap SOB who buys just about everything used or discounted because it has been discontinued. My wife home cooks (from scratch) just about everything we eat, including making her own condiments. We go out to dinner maybe three or four times a year. I follow in the wake of the ‘buy every fucking bauble and toy in sight’ people and pick up their ‘droppings’.
No horn tooting here, just pointing out the fact that every single American is NOT responsible for this mess. Some of us have been responsible, but we are going to be forced to pay for this mess that the irresponsible idiots have created.
We all hang together.
CR was estimating paper losses of 3-4 trillion total about a month ago, so it is getting worse as time passes. Congresscritters are over their heads in this mess, and they are getting advice on how to deal with it from some of the same people who caused this mess.
It is truly the blind leading the blind, and there are cliffs everywhere.
Damn straight John.
The Populist
Thatleftturn,
It’s cool, just venting. I figured you were being snarky. I figured I’d post my outrage to those who do try to make the case that trickle down economics is great, tax breaks for the superrich are even better as long as those evil “tax and spend” liberals aren’t in charge and oh my the end is coming!
I’d take a tax & spend lib anyday over a borrow and borrow and borrow and spend con who thinks he/she/it is being a good little republican by pretending they have principles.
Principle is making sure you aren’t saddling the American people with unnecessary debt, starting and stubbornly cheerleading unnecessary wars all the while talking up a free market while bailing out your contributors and supporters with the people’s money. Free markets they say? How’s that? Last time I checked this so-called free market is nothing more than crony capitalism at it’s worst.
No bid contracts to buddies of the administration, stacking the courts with judges who will do the ideological bidding of these folks and giving rich tax cuts in a time of war. Sad…
The Populist
Fledermaus,
Ever heard of the kid named Casey Serin who bought 8 homes in less than 6 months because HE thought he could be Robert Kiyosaki Jr?
Well, to get the loans he was allowed to lie about his income (so maybe I should add the independent mortgage brokers to that list of mine) to get his loans. He did it so quickly that he fooled the Fair Isaac system because most loan companies would see all the inquiries but no accounts yet. He used every trick in the book to load up.
His next play was to hire an appraiser to tell the banks that home xxx is worth $xxx so he could get “cash back at close.” I blame people like him for this mess but I also blame the Fair Isaac system for being so beatable (people are paying folks with good credit to allow them to be co-signors on accounts that they will never use only to build their FICO score) and the appraisers for playing along with the mortgage brokers to get the big loans and the cash back at close.
Argh. It’s all so twisted yet many others did what little Casey did. And the funny part of this? Casey let all the homes go to foreclosure because he was incompetent and couldn’t find buyers at a profit. The kid even started a bogus California Corp and used a capital loan to buy crap penny stocks. Go to google and look him up, it’s a true story and the kid is never gonna see a day in jail for his crimes.
THIS is the problem. Folks like him and the idiots who pitch this flip the house, get rich quick nonsense while getting respect from the media.
Robert Kiyosaki, Donald Trump, Laurel Langmeier, Dolph DeRoos, Damion Lupo are all scum and Americans celebrate them because THEY are rich (on paper) and you can be too!
I see what you mean (not coming down on you…I am a bit of an emotional venter!).
Take care…
The Populist
I believe we are a much different world than in 1929, but I feel we could be doomed if we continue with the blame that guy, not me type thinking persists.
Hoover did NOTHING while America fell hard. We will all be paying for this nonsense for MANY years to come, yes, but the key is that we all need to put aside this idea that to help people is only going to encourage this nonsense to continue. It can’t happen again IF we insist on tougher rules in exchange for bail outs. Sweden pulled out of their mess and I believe we can too. It’s time to put aside Trickle down economics and all the other crap that’s been shoved down people’s throats as good and right and accept that we can’t allow the fox to guard the henhouse any longer.
I don’t like it one bit, but to live another day means doing things we will all be mad about YET know that if it’s done right we can weather this. Things WILL NEVER be the same BUT maybe we can finally put a nail into the coffin of this extreme Republican thinking that free markets can’t have any regulation.
One can have free markets as long as there are known rules to the game. When we deregulate, we are creating anarchy as the markets will always be driven by greed. These people need to understand that we did it their way and AGAIN it failed miserably. Nobody is telling them that they have to downsize their lives or share their wealth. What we are saying is YOU have to play by the rules of the game that everybody else has to. No more handouts, no more no bid contracts, no more trickle down – rich come first thinking.
HyperIon
Sweden is the country we will model ourselves on?
wtf?
Scruffy McSnufflepuss
Somehow, I’m guessing that “Are you better off now than you were 8 years ago?” will not be a major theme of the McCain campaign.
LiberalTarian
Don’t tempt fate. You really wanna see civilization come crashing down around our ears??
One little bird flu and no more groceries at the supermarket. Who is going to keep the electricity and phones working? What about your water? We really do live in a fragile world, depending on oil and markets and good epidemiological luck.
This is an economic crisis, and we’ll all be bitter and poor, but civilization will be fine.
So, yeah, like the man said, we’re fucked, but only for a while. Don’t lose perspective, ok? And, it probably wouldn’t hurt to stockpile dry beans and a means to purify water. And liquor. Lots and lots of liquor. ;)
grumpy realist
Hey, I resent that remark about the opera. I’m perfectly willing to live off lentils and brown rice (and often do) if it means I can get good season’s tickets at the local opera.
In any case, when you look at what even top-class opera season’s tickets cost, it’s hard to think of anything else I can pay for that gives me an equivalent feeling of entertainment and culture at such a cheap price. Much more thrifty than getting a McMansion or a BMW.
Scruffy McSnufflepuss
Thankfully, we have a decent Christian President, so God hasn’t been tempted to smite us all with SARS yet.
After the Apocalypse, will we still have reality TV and 24-hour updates on the state of Britney’s crotch? I don’t want to live in a world without culture!
And make sure that water’s holy water, in case the vampires come out in force this Depression. I’d suggest hiring a priest to live with you and bless your water every day, hang crosses to keep the demons and vampires out, make sure you say grace at every meal, and periodically check on you at night to make sure you don’t masturbate. That’s the only purification system your home will ever need.
LiberalTarian
Beans. Lots and lots of beans’ll keep those priest bastards away.
Of course, they’ll be at your door for the liquor, but keep that quiet and all will be good. :D
TenguPhule
I call spoof.
60%-300% inflation in basic commodities is not good.
Food riots beginning overseas. Not good.
Less bees doing the pollinating. Not good.
Less crops being grown in favor of bio-fuel. Not good.
We are one crop failure away from Hell.
Jess
hmmmm…no chance of that happening, is there?
Randolph Fritz
“Our food supplies are fine.”
No, actually. (NYT link.) Though with the following remarks on climate change, I wonder if this is a troll.
We’re fucked. Like, totally.
TenguPhule
In other words, presuming we survive this one, the next one will be worse.
jake
Unless you have small children.
[rim shot]
chopper
guys, it was pretty obviously snark.