Is Vegas The Next Detroit?
Both are single industry towns. One Automotive, the other gambling.
Both had all the executives and the technical knowhow to do the things that needed to be done to make its industry GREAT.
From 1910 to 1965, you were in DETROIT if you wanted to be in the Auto Business. Germany, and Japan? Finally recovering from the war....
You could say the same about Vegas from 1946 to 2006. THIS was the place where you do something in the gambling business...
Is Vegas facing the same types of crisis that Detroit faced? No. Detroit was built to support 1.5 million people, and its population is down to 850k now. That's 300k to 350k in housing stock that isn't needed anymore.
The factories got old, and the technology started to lag, and Germany and Japan? Started squeezing the market. One from the top, and one from the bottom. And the Japanese had a significantly better Gross Profit Margin advantage.
While the technology started to flow away from Detroit at that point, the real killer for the city, was the loss of the jobs that supported the city. New Auto factories were built AROUND the city, and then instead of the overseas manufacturers building plants in MI, they started building them in the South. So, once again, no reason for people to stay inside the city limits. And who wanted to live in a house that was built in 1910-30? That was tiny? That had bad schools? Etc? So the population left the city.
For Vegas? Thegambling in the future will be around China and India. That is were the big dollars are going in the future. Can it continue to be controlled by LV? Maybe. IF the Major corps continue to be headquartered in LV. If they are bought by conglomerates in China or India, then LV WILL die. Thousands will still come to LV. And the hotels will fill up. The average $$ spent per tourist will decline however, as the big $$ stay overseas.
LV will not die like Detroit. The MSA around Detroit is still Strong. Just like it will be in LV and Clark County. For MANY Years. But the gambling that is available EVERYWHERE now in the US, will hurt LV to a certain extent. Folks are going to go to LV, becasue of the spectacle of it all, but they will not be going back 5 or 6 times. BTDT. And the recreational gambler? Doesn't have to travel as far, and that is very difficult to overcome.... So, LV will not be a "ghost Town" in 30 years.
It will not have any new "mega" casinos for at least another 10 years. Then they will rebuild some of the older hotel/resorts, one every 4-5 years. The growth will NEVER be there to do it faster than that.
JMVHO.
SFB
I agree Bob, it's such a shame that people a companies didn't have more foresight and prepare better for what they should have seen coming so that you and your wife could retire in Las Vegas withouth the possibility of your retirement home losing value. It's tragic and it makes me wonder why they would do this to you. All of Las Vegas should be ashamed and they owe you a big personal apology.Quote: EvenBobMy wife and I have planned on retiring to Vegas for the last 20 years. If I'd bought a condo last year like we planned, it would now be worth less than I paid for it. Ditto if I buy one this year. Am I bitter? What do you think.
Quote: EvenBobI swear, I found this 20min after I made the first post. From earlier this month:
Is Vegas the New Detroit?
http://publicaffairs.unlv.ath.cx/articles/Daily%20Clips/05-12-2011.Is%20Vegas%20The%20New%20Detroit%20%28Money%20Show%29.pdf
I just saw this one today.
http://money.msn.com/home-loans/is-las-vegas-the-new-detroit-marketwatch.aspx
Quote: SFB
Folks are going to go to LV, becasue of the spectacle of it all, but they will not be going back 5 or 6 times. BTDT. And the recreational gambler? Doesn't have to travel as far, and that is very difficult to overcome....
Thats it in a nutshell. Like my friend I was mentioning, he went once and loved and is never going back. Once you've seen it, thats it. If you can gamble elsewhere, you'll do that. Not everybody feels that way, but there are enough who do.
Quote: TheNightflyIt's tragic and it makes me wonder why they would do this to you. All of Las Vegas should be ashamed and they owe you a big personal apology.
Wow, really bitter, huh. I'll mail you a crying towel, can you wait that long? Don't do anything to harm yourself or others in the meantime..
Quote: TheNightflyI agree Bob, it's such a shame that people a companies didn't have more foresight and prepare better for what they should have seen coming so that you and your wife could retire in Las Vegas withouth the possibility of your retirement home losing value.
I feel like the federal reserve owes me and most of America an apology for what they did in 2001. By massively cutting interest rates, they destabilized America's financial system. By reducing the impact of the 2001 recession, they set the world up for a much nastier depression 6 years later.
Quote: pacomartinthey set the world up for a much nastier depression 6 years later.
The greedy people in charge set themselves up. Now they're saying home prices are falling faster than they did during the Depression, percentage wise. A house is just another commodity, its ruled by supply and demand. Right now there is hardly any demand at all, so the prices continue to fall, seeking the level where the demand is. In Vegas, there is almost no demand, so they fall drastically. In Santa Barbara, demand and supply are about equal, so its stable. Whats scary is, nobody knows where the basement is, they just know we haven't reached it yet. 28% of the mortgage owners in the country are underwater. 70+% in Vegas. This means you now have no equity in your house, you can't sell it, pay off the mortgage, and use whats left as down payment on another house. If you have a job in Vegas, and rent, you can ignore the news and everything will seem almost normal to you. I know this from experience. There was a big recession in the early 80's, lots of unemployment and high interest rates. But because I owned a bar and had a job, and never watched the news, I was blissfully unaware of it. Bars thrive during recessions, and mine did as well. So to many in Vegas, it probably seems like business as usual. Unless you own a house or are looking for work, that is.
Quote: pacomartinI feel like the federal reserve owes me and most of America an apology for what they did in 2001. By massively cutting interest rates, they destabilized America's financial system. By reducing the impact of the 2001 recession, they set the world up for a much nastier depression 6 years later.
In what bizarro economic theory does that come about?
This downturn is due to subprime mortgage lending. Period. Spreads priced in the quality of the borrower, not the Fed rate, and the lenders set the spreads. You could say that lenders engaged in predatory lending, but that would be wrong. It costs a bank a helluva lot more to repossess a house than its value, and the lender loses money ... see also bailouts. No bank in the world lends money hoping and praying it gets to repossess the asset. Hell, even stupid pop culture (i.e., Wall Street 2 - Money Never Sleeps) acknowledges that, if not the policies that brought it about.
So, by all means, let's intentionally make money more expensive. Never mind the problems with cash holdings, reserve requirements, and falling AVs.
You're a smart dude, paco, but ... sheesh.
Quote: ItsCalledSoccer
This downturn is due to subprime mortgage lending. Period. Spreads priced in the quality of the borrower, not the Fed rate, and the lenders set the spreads. You could say that lenders engaged in predatory lending, but that would be wrong. It costs a bank a helluva lot more to repossess a house than its value, and the lender loses money ... see also bailouts. No bank in the world lends money hoping and praying it gets to repossess the asset. Hell, even stupid pop culture (i.e., Wall Street 2 - Money Never Sleeps) acknowledges that, if not the policies that brought it about.
It was more than subprime. I worked at a blue-chip lender and even there the mantra was, "Eliminate requirements, stated income loans if possible, get it done FAST!" One guy was a russian immigrant and you knew a loan he wrote would have problems. The running joke was just give the russian mafia 80% of the loan value and save everyone the stress. He later did time in the can from what I heard.
Housing prices will find their bottom when housing costs get to the historical ratio to income. It will not happen until. And currently the double dip is coming and we have an anti-business administration in DC. Lower debt, conserve cash, buy when the price is right, to live not to flip.
Not necessarily "green" ones, either.
For example, a rocket fuel plant.
I mean, what could happen ...
http://www.youtube.com/watch?v=_KuGizBjDXo
Quote: ItsCalledSoccerYou're a smart dude, paco, but ... sheesh.
No, you are right. I should be reprimanded.
I was telling someone about what we used to call Fannie Mae conforming loans. I couldn't figure out what was happening because it seemed to me that even if the interest rate was nearly zero, people couldn't afford these loans. Someone just laughed at me, and said that the banks had thrown out those rules years ago.
I was actually shocked (I took Real estate classes in the early 1980's). I remember when those kind of loans were illegal. They used to call them predatory lenders. So what used to be predatory, was now the norm?
The rule for a conforming loan was that a maximum of 28% of your income could go for PITI, and 33% of your income could service your long term debt.
Quote: AZDuffmanAnd currently the double dip is coming
"A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession."
But was there really a recovery? When was that? Obama declared last year that is was 'recovery summer', but it never happened. If there was even a tiny one, does it warrant calling whats coming or happening a 'double dip'?
Quote: EvenBob"A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession."
But was there really a recovery? When was that? Obama declared last year that is was 'recovery summer', but it never happened. If there was even a tiny one, does it warrant calling whats coming or happening a 'double dip'?
The "official definition" of the recession beginning and end is always much shorter time period than you think. The recession has been finished for almost 2 years now, and actually only lasted 12 months.
Jan–July 1980 - 6 months
July 1981 –Nov 1982 - 1 year
July 1990 – Mar 1991 - 8 months
March 2001–Nov 2001 - 8 months
Dec 2007-June 2009 - 1 year
Quote: EvenBob"A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession."
But was there really a recovery? When was that? Obama declared last year that is was 'recovery summer', but it never happened. If there was even a tiny one, does it warrant calling whats coming or happening a 'double dip'?
I will stick by the textbook definition being GDP Growth. Obama seems to be getting frustrated that economic growth is not automatic. His lines of BS will play to fewer and fewer people. The press can only hide reality for so long as well.
Quote: pacomartin
I was actually shocked
Things were really strange in the years just before the crash. In spring 2008, my wife had a nephew who was 21 and was bouncing checks all the time and getting big fee's for it. His bank manager asked why didn't he have overdraft protection, and the kid said he didn't have a credit card. No problem, said the manager, I'll get you one. A week later he handed the kid a Visa card with a $1000 limit. No application, no income approval, just gave him a card. Well, the kid was unemployed, and he went out and spent the grand in the first month. He made the first payment, was 2 days late on the second one, and they wanted $300 for the 3rd one. He said screw you and threw the card away. A true story. 10 years ago, he never would have gotten the card at all, the fact they gave him one without even checking him or his credit just blows my mind.
Quote: pacomartin
Dec 2007-June 2009 - 1 year
Its such BS. It never ended, there were no new jobs, housing continued to plummet. The average person couldn't tell anything, just like we won't notice any difference when its called a double dip. Its just meaningless words.
I am glad we are moving there this month, and I shall continue to pile away cash until the time is right to buy. I think my plans to retire in the great city will pay off in the long run.
But if not......
It helps that I am in a recession proof industry. I have more money in the last 2 years than I did the 5 before.
Quote: EvenBobThings were really strange in the years just before the crash. In spring 2008, my wife had a nephew who was 21 and was bouncing checks all the time and getting big fee's for it. His bank manager asked why didn't he have overdraft protection, and the kid said he didn't have a credit card. No problem, said the manager, I'll get you one. A week later he handed the kid a Visa card with a $1000 limit. No application, no income approval, just gave him a card. Well, the kid was unemployed, and he went out and spent the grand in the first month. He made the first payment, was 2 days late on the second one, and they wanted $300 for the 3rd one. He said screw you and threw the card away. A true story. 10 years ago, he never would have gotten the card at all, the fact they gave him one without even checking him or his credit just blows my mind.
I wonder if I took a call from him? We got all kinds of wierdo things and even made a list. A favorite:
"Well, you got declined because you have an account in collections."
"That is the store's fault."
"How is that?"
"Well, the watch i bought got stolen so I told them to remove the charge since I should not have to pay for something I do not have anymore!"
When those TV shows have that disclaimer, "relation to real events is coincedental" NEVER believe that. Reality gives lifetimes of material.
Quote: ItsCalledSoccerIt costs a bank a helluva lot more to repossess a house than its value, and the lender loses money
Tell that to the geniuses at places like Wells Fargo and HSBC. One took a huge government bailout and the other is talking about leaving its U.S. retail business altogether.
Quote: SanchoPanzaTell that to the geniuses at places like Wells Fargo and HSBC. One took a huge government bailout and the other is talking about leaving its U.S. retail business altogether.
Umm ... losing money on bad mortgages is why they "needed" the bailout, which I think I put in that same sentence but you didn't include in the quote. I don't have breakfast with those CEOs, but I'm guessing they would rather make money on good loans and not "need"/take a bailout than be forced to make bad loans and deal with what they're dealing with. They weren't in business to lose millions so they could "qualify" for government bailouts. Thinking that's the case is ... umm ... revealing.
Quote: pacomartinI was actually shocked (I took Real estate classes in the early 1980's). I remember when those kind of loans were illegal. They used to call them predatory lenders. So what used to be predatory, was now the norm?
Kind of. The difference was that Fannie's charter was amended under Bush Sr. with something called the Housing Community Act or something, which said something like Fannie has an obligation to do loans in low and moderate income areas, and set up quotas to make sure that happened. Clinton amped up these quotas in the late 90s. Meanwhile, Fannie's owners still had return thresholds, so Fannie's only solution was to write bad loans ... after all, it's backed by the government. Private lenders followed, not just to keep pace, but because they also were pressured by Clinton - lend to bad borrowers or we will impose fines/stop mergers/audit you, etc.
The only way to meet these amped-up quotas was to ... you guessed it ... write ridiculous loans. Nine years later, housing begins to crash. One year after that, so does the rest of the economy.
Quote: ItsCalledSoccerI don't have breakfast with those CEOs, but I'm guessing they would rather make money on good loans and not "need"/take a bailout, but I'm guessing they would rather make money on good loans and not "need"/take a bailout than be forced to make bad loans and deal with what they're dealing with.
If a CEO coverups a product defect because he can make big profits and collect big bonuses that's short term thinking.
You're saying such is not possible?
...Or bankers are exempt from such thinking?
Quote: ItsCalledSoccerI'm guessing they would rather make money on good loans and not "need"/take a bailout than be forced to make bad loans and deal with what they're dealing with. They weren't in business to lose millions so they could "qualify" for government bailouts. Thinking that's the case is ... umm ... revealing.
In the go-go era leading up to 2008, the idea was volume--volume, volume, volume at all costs. Even when the borrower didn't have a penny to his or her bottom. The bankers and executives' compensations were based on that. And those bums, just as with many of the politicians and bureaucrats who fostered that insanity, have moved on with their huge ill-gotten gains.
Just realize that one person--a low-level figure at Goldman Sachs--has been prosecuted in all that trillions of dollars of shamelessly outright lying and fraud.
Quote: rxwineIf a CEO coverups a product defect because he can make big profits and collect big bonuses that's short term thinking.
You're saying such is not possible?
...Or bankers are exempt from such thinking?
CEOs are just as vulnerable as the next guy when it comes to corruptibility or covering-their-ass-ability, and they also have greater temptations and resources to do that.
But I'm saying neither.
The "product defect" wasn't their making. It was foisted upon them, with the alternative being government harassment. Any normally-motivated lender would not offer such products unless they were forced to, which they pretty much were. Imagine being a sandwich maker, and being told by the government that you have to sell sandwiches at, oh, 70% of your cost, and you have to sell them to certain people. You would sell shit sandwiches or go out of business, and then you would be blamed by the public for your "product defect" that wasnt your making, and for needing a bailout when you lost money.
Lenders were forced to polish the turd known as Amped Up Quotas. If you're looking for overpaid big-bonus bad guys, you need look no further than Mudd, Clinton, Dodd, and Frank.
I sense that you're trying to put blame and bad motive on CEOs just because they're CEOs. And there are some bad ones out there. But the bad guys here are Democrat politicians, not private lending CEOs.
Quote: ItsCalledSoccerKind of. The difference was that Fannie's charter was amended under Bush Sr. with something called the Housing Community Act or something, which said something like Fannie has an obligation to do loans in low and moderate income areas, and set up quotas to make sure that happened. Clinton amped up these quotas in the late 90s. Meanwhile, Fannie's owners still had return thresholds, so Fannie's only solution was to write bad loans ... after all, it's backed by the government. Private lenders followed, not just to keep pace, but because they also were pressured by Clinton - lend to bad borrowers or we will impose fines/stop mergers/audit you, etc.
The loan rules were instituted after 1992--under Clinton, Andy Cuomo and Frank Raines:
"Hidden Clinton “Success Story”: Fannie Mae subprime loans for minorities
by Horatius on September 26, 2008
Today’s subprime mortgage meltdown began with a lofty, deliberate, fuzzy-headed effort by the Clinton administration to turn more latinos and blacks into homeowners, or so it appears from 1999 news reports — buttressed by hard data from a 2007 study of subprime lending. Yesterday’s soft and cuddly government program is today’s financial chainsaw massacre.
Far from an illustration of free-market dysfunction, today’s mortgage mess is a classic case of socialistic governmental intervention gone awry. Take, for example, the May 31, 1999 LA Times article* by Ronald Brownstein, excerpted below. In it, the author touts the proliferation of low-end mortgages as a signal accomplishment of Clinton’s time in office:
It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.
These numbers are dramatic enough to deserve more detail. When President Clinton took office in 1993, 42% of African Americans and 39% of Latinos owned their own home. By this spring, those figures had jumped to 46.9% of blacks and 46.2% of Latinos.
. . . Since 1994, when the numbers really took off, the number of black and Latino homeowners has increased by 2 million. In all, the minority homeownership rate is on track to increase more in the 1990s than in any decade this century except the 1940s . . .
What explains the surge? The answer starts with the economy. . .
But the economy isn’t the whole story. As HUD Secretary Andrew Cuomo says: “There have been points in the past when the economy has done well but minority homeownership has not increased proportionally.” . . .
All of this suggests that Clinton’s efforts to increase minority access to loans and capital also have spurred this decade’s gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.
Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more.
Note: These “securities” are instruments like the CDOs and CDSs that led directly to the collapse of AIG and other large finance institutions.
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected. . .
But with discrimination in the banking system not yet eradicated, maintaining the momentum of the 1990s will also require a continuing nudge from Washington. One key is to defend the Community Reinvestment Act, which the Senate shortsightedly voted to retrench recently. Clinton has threatened a veto if the House concurs.
The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.
Barry Zigas, who heads Fannie Mae’s low-income efforts, is undoubtedly correct when he argues, “There is obviously a limit beyond which {we} can’t push {the banks} to produce.” But with the housing market still sizzling, minority unemployment down and Fannie Mae enjoying record profits (over $3.4 billion last year), it doesn’t appear that the limit has been reached.
All signs point toward a high-velocity collision this summer between two strong-willed protagonists: HUD’s Cuomo and Fannie Mae CEO Franklin D. Raines, the first African American to hold the post. Better they reach a reasonable agreement that provides more fuel for the extraordinary boom transforming millions of minority families from renters into owners.
To get a graphical perspective of the problem, take a close look at the picture below (excerpted from p. 21 of the 2007 study referenced at the top of this blog entry) showing loans made in 2005 by one subprime lender in New York City. Red dots represent subprime loans made. Cross hatching shows a part of the city populated > 50% by blacks and latinos. The correlation is pretty hard to miss. . . .Contrarian
Quote: SanchoPanzaIn the go-go era leading up to 2008, the idea was volume--volume, volume, volume at all costs. Even when the borrower didn't have a penny to his or her bottom. The bankers and executives' compensations were based on that. And those bums, just as with many of the politicians and bureaucrats who fostered that insanity, have moved on with their huge ill-gotten gains.
Just realize that one person--a low-level figure at Goldman Sachs--has been prosecuted in all that trillions of dollars of shamelessly outright lying and fraud.
The whole thing started tanking long before 08, probably closer to 04-05, when the investment banks began issuing MBSs based on crappy loans ... Kind of a contemporary version of junk bond trading. They did this because the govt was doing it as a result of the amped up quotas, and the historically low rates. The govt then started writing even junkier "junk" securities (except for FHA which just did nothing, which is why that's the main financing arm available today).
In other words, the govt screwing with the free market was the catalyst. You can't blame private lenders for the govt's issuing of "junk" securities. Doing so is a complete divorce from reality.
Quote: ItsCalledSoccer
The "product defect" wasn't their making. It was foisted upon them, with the alternative being government harassment.
That's the Nazi, "I was just following orders" defense.
NO one bought that excuse either, and for good reason.
Only one is in Nevada, and it's not Vegas.
Quote: pacomartinFive Places Where the Bubble May Burst lists five towns with a predominate industry.
Only one is in Nevada, and it's not Vegas.
"Don't tell that to Las Vegas, which is still trying to pick up the pieces after the housing bubble's pop shattered its real estate industry. Average home prices dropped from $220,000 in 2008 to just $128,000 in the first quarter of this year."
The better stat is the price has dropped from $330,000 in 2006, to $128,000 today.
Quote: rxwineThat's the Nazi, "I was just following orders" defense.
NO one bought that excuse either, and for good reason.
The only one engaging in hyperbole is you. This is probably just a transparent attempt to try to make a point without, you know, actually having a point. The old "my enemy is Hitler" defense. Nice. You should at least do the courtesy of using the whole quote instead of parsing ... which is, by the way, a Nazi-esque tactic.
The lenders were perfectly free to not follow the directives ... and get a public visit from Jesse Jackson, or having their merger application denied, or go out of business, or suffering an audit which may increase reserve requirements, would get announced to the market, cause an increase in insurance premium, loss of millions in shareholder value ... or other forms of vilification and innuendo. Instead, they (maybe cowardly) bowed to government pressure and wrote and securitized bad loans to try to make the best out of an unsustainable situation, which doesn't sound Nazi-esqe at all.
That means the only folks engaging in Nazi-esque behavior are the Democrat politicians. Oh, and you.
Quote:The lenders were perfectly free to not follow the directives ... and get a public visit from Jesse Jackson, or having their merger application denied, or go out of business, or suffering an audit which may increase reserve requirements, would get announced to the market, cause an increase in insurance premium, loss of millions in shareholder value ... or other forms of vilification and innuendo. Instead, they (maybe cowardly) bowed to government pressure and wrote and securitized bad loans to try to make the best out of an unsustainable situation, which doesn't sound Nazi-esqe at all.
From the federal reserve website.
http://www.federalreserve.gov/faqs/banking_12625.htm
Quote:Did the Community Reinvestment Act (CRA) contribute to foreclosures and the financial crisis?
The Federal Reserve Board has found no connection between CRA and the subprime mortgage problems. In fact, the Board's analysis (102 KB PDF) found that nearly 60 percent of higher-priced loans went to middle- or higher-income borrowers or neighborhoods, which are not the focus of CRA activity. Additionally, about 20 percent of the higher-priced loans that were extended in low- or moderate-income areas, or to low- or moderate-income borrowers, were loans originated by lenders not covered by the CRA. Our analysis found that only six percent of all higher-priced loans were made by CRA-covered lenders to borrowers and neighborhoods targeted by the CRA. Further, our review of loan performance found that rates of serious mortgage delinquency are high in all neighborhood groups, not just in lower-income areas.
Quote: http://www.federalreserve.gov/faqs/banking_12625.htm@The Federal Reserve Board has found no connection between CRA and the subprime mortgage problems.
A self-serving quotation as flagrant as we are likely to see in this discussion. Especially when viewed alongside contradictory gems like this one from the same document:
Quote:"Although CRA performance evaluations have become more quantitative since regulatory
changes in 1995, stressing actual performance rather than documented
efforts to serve their community’s credit needs, the CRA does not stipulate
minimum targets or even goals for lending, service or investments. At the
same time it is fair to say that the primary focus of the CRA evaluations is
the number and dollar amount of lending to lower-income borrowers or
areas. However, the agencies instruct examiners to determine an
institution’s capacity to extend credit to lower-income groups and assess
local economic and market conditions that might affect the income and
geographic distribution of their lending and to judge their performance in
this context."
In other words, it was the government's policy not to specify publicly what was demanded of the lenders, but to pressure them subtly, under the table.
However, is this part true or not?
Quote:In fact, the Board's analysis (102 KB PDF) found that nearly 60 percent of higher-priced loans went to middle- or higher-income borrowers or neighborhoods, which are not the focus of CRA activity. Additionally, about 20 percent of the higher-priced loans that were extended in low- or moderate-income areas, or to low- or moderate-income borrowers, were loans originated by lenders not covered by the CRA
Yes... and NO.
The original pieces of the CRA where to have the banks INVEST in these poorer neighborhoods SOMEHOW. By having a bank, and accounts, and actually lending into these areas. Banks do NOT want to make loans to people who are NOT going to pay it back. They only want to write good loans. So, a significant portion of the population doesn't get served.
So the government stepped in with the CRA, in the 70's!. And over time, they had "mission-creep" and added more requirements to the CRA, and the banks had to do more and more. That helped ALOT of people. Folks who didn't have alot of cash, or had good but low-paying jobs, and they were able to get banking services.
And the "mission-creep" continued....
Then we get to the end of the Clinton Administration, and Franklin Raines proposes, and get the administration to pass a 3 billion "fund" at Fannie Mae, to encourage home onwership in lower income areas. These funds were to be used by Fannie to fund up to 30 billion in mortgages, with lower standards, than "normal". This program is a SUCCESS! Many new people start to get thier "own homes!" and the home owner % starts to climb, after being fairly stagnant for many years.
Mission creep again, now under the W. Bush administration. Raines was able to secure a appointment as the head of Fannie Mae before Clinton left. FM expands the lending program, and the administartion and the Congress go along with it, becasue it seems like a "good thing". Housing prices start to rise, as the "conservative" lending practices of the past are peeled away. Before long, FM, and Freddie Mac, are buying ALL the loans. The Banks just originate them, then sell them to FM/FM, collect the huge fees, and the risk is now all on FM/FM. (oh, sorry.... ALL THE RISK IS ON THE US GOVERNMENT!)
But its working, the economy is good, the homeowner % is rising, there in new construction, even in the inner cities, and everything looks GREAT!. The storm clouds of doubt, that by allowing the weakening of the lending standards, a HUGE uncalculated risk was being taken, were scoffed at....
BOOOM.
Fannie Mae was created in 1936. Freddie Mac in the 60's for "competition" to Fannie. They had a special place in the marketplace. The banks could have a loan that conformed to FM/FM standards, and they would buy the loan, and the bank could go and create new loans. They could also write all the loans they wanted that were outside the lending standards, but the banks were on the hook for those.... (FDIC was in charge of monitoring that...)
The original program wasn't the problem. It was the mission creep that allowed ANYONE to get a loan. Even folks who had good credit, but not enough income for a "second home".
And like anything else, there are many causes for what happened, finally, in 2007/8. It was only a matter of time.
There is enough mud on both sides of the aisle.
We, as taxpayers, just get to clean it up, again.
SFB
Quote:found that only six percent of all higher-priced loans were made by CRA-covered lenders"
If 6% is true, that's not much of impact by the CRA. (if you ask me, but you didn't, but whatever...)
If it's not true, or someone is bending the facts at the FED, then maybe there's a way to find the answer (but I don't know how to do that I'm afraid)
edited to add quotes
MGM, Harrahs, WynnCore, and Sands are still bringing in cash to pay down debt. They are by far the hugest interests on the strip. It's really up to them to help with the success or failure of the strip. All four companies have gaming interests off the strip. From a taxation standpoint, having corporate headquarters in NV makes sense. From a taxation standpoint, I believe that the other states take in far more of a percentage of revenue from gaming than Nevada. Based on 2010 data, Nevada only takes in 8.04 percent, NJ takes in 8.57 percent, while PA took 53 percent of gaming revenue last year. IN is 31.31 percent and IL is 33.92 percent. MI is 22.6 percent. MS is 11.94 percent.
So, from the casino's execs' standpoint, having success in NV and NJ is far more important than being successful elsewhere. Because so little revenue is taxed in NV and NJ they can and should make gaming more attractive there than everywhere else in America by offering more comps. I think that even the Wynn's and Sands' practice of flying high rollers from Asia into Vegas (rather than having them go to Macau) is a tax based decision.
The housing market's massive correction in Vegas was reasonable and if anything, I think that Vegas homes are undervalued at this point in time. From a crime perspective, Detroit's violent crime rate is twice as much as Vegas. Detroits murder/manslaughter rate is five times as high as Vegas. On the other hand, Vegas' has 3 neighbourhoods in the top 10 of most dangerous neighboorhoods in the United States according to neighbourhoodscout.com. But Vegas's crime rate is still four times higher than the national average and needs to come down. Still, it has very safe areas, and the strip is one of them.
Vegas is in trouble, but because gambling is its one trick pony, it can't outsource tourists like the auto companies outsourced EVERYTHING. Nevada makes its tax rates very attractive for the corporations to operate. Its success is based on the success of the economy as a whole. The corporations are on Vegas' side because it's such an attractive place to operate. This is different from Detroit, where the cost of doing business drove the corporations out.
Quote: boymimboDetroits murder/manslaughter rate is five times as high as Vegas. On the other hand, Vegas' has 3 neighbourhoods in the top 10 of most dangerous neighboorhoods in the United States according to neighbourhoodscout.com. But Vegas's crime rate is still four times higher than the national average and needs to come down. Still, it has very safe areas, and the strip is one of them.
I'm guessing casino security might actually have an impact on criminal activity, as the ne'er do wells gravitate there eventually, get into "issues" with security, and end up as a guest of LVPD. At least, that's possibly an advantage over Detroit.
Quote: SFBAnd the "mission-creep" continued....
Are you familiar with the tulip bulb mania in the Netherlands in 1636? It is the first recorded instance where wild financial speculation in a product that far exceeded most people's idea of "intrinsic value" suddenly collapsed. People were stuck with a bunch of tulip bulbs for which they had paid a tremendous price.A book published in 1841 called Extraordinary Popular Delusions and the Madness of Crowds was one of the first books to talk about financial bubbles and made the tulip bulb mania famous.
In the 1960's you bought a home for 36 months of salary, and you financed 30 months for a 30 year note, and you paid 6 months in cash. I think my father paid off his first home in 8 years so that he would have money for home improvements.
If you borrow $100K at 5% a year, that is $500 in interest per month. A traditional 30 year note requires a payment of $599.55 (principal + interest). The sort of old fashioned theory was that if you paid an extra $116.88 per month you could pay off the note in 20 years.
Theoretically if that payment is too high, your could reduce it to $514.18 and it would now be a 60 year note, and $500.38 it would be a 120 year note. While that seemed ludicrous, about 20 years ago it became popular in Japan to purchase homes with 60 and 120 year notes.
It's hard to believe that we developed finance programs that now make 60 and 120 year mortgages seem conservative.
I know the Canadian government recently reinstated a lot of the financial rules for their home loan backing systems (no more than 95% loan-to-value on first mortgages, no more than 85% (?) on remortages) and so on. I was offered crazy multipliers on my income (upto 5 times). I refused as it being unworkable... but still brought my first apartment last year before the rules really got clamped down on (with only 3 years debt history in Canada and a small down payment they wouldn't loan me at the same rate now as they did 12 months ago). 35 year mortgages have also been banished in most cases (or all, not exactly sure).
Problem was two way... house prices shot up, removing a lot of first time buyers from the market, so they relaxed the rules, which fuelled house price rises. At least in the UK, where space is at a premium.
Quote: SOOPOOI think crime rates can be deceiving. Buffalo has some of the most dangerous neighborhoods in the world. My suburb, Amherst, has been #1 or 2 in 'safest cities in America', or something like that. I would guess there are some very safe areas of metro Detroit. As far as the mortgage mess, when I went looking for my first house/condo 25 years ago, I went to the mortgage broker, she inputted our salaries, savings, etc... and came up with an acceptable mortgage size DOUBLE what I would feel comfortable with. As I started making more money and went to buy my house in Amherst, they came up with a number TRIPLE what I felt comfortable with. I can assure you that the mortgage broker gets paid on the signing of the mortgage, and likely has no personal repercussions on its default a few years later.
I always remember Amherst coming in high. I was there many times and it does not "feel" safer than most other nicer suburbs but I think it being so big messes with the numbers. Here in Pittsburgh they did a "safest neighborhoods" and the most unsafe most people didn't even know existed. It was a "bad" part of town but at just a few blocks one crime drove the "rate" up. BTW: Do you prefer "Anderson's" or "Charlie the Butcher?"
On affordablilty the bank has a % of income. If you go to the top and cannot afford furniture (and I've seen that so often!) they do not care.
"What? Your store got hit by lightning and two customers got into a fight and WWIII broke out? FU-pay me!"
Quote: AZDuffmanI always remember Amherst coming in high. I was there many times and it does not "feel" safer than most other nicer suburbs but I think it being so big messes with the numbers.
Statistically, roughly half the people in the USA live in one of the 51 metropolitan "statistical areas" with over a million people. Out of these 51 areas, 5 are losing population over 2000-2010.
1) New Orleans-Metairie-Kenner, (loss 40 people per day on average)
2) Detroit-Warren-Livonia, MI (40 people per day)
3) Cleveland-Elyria-Mentor, OH (20 people per day)
4) Pittsburgh, PA (20 people per day)
5) Buffalo-Niagara Falls, NY (10 people per day)
While generally New Orleans, and Detroit are portrayed as disasters you hear a lot less about the other three.
Presumably without population growth Cleveland, Pittsburgh, and Buffalo were spared the worst of the rampant land speculation and real estate bubble. Not that I said, spared the worst.
If you live there, do you feel left out by not being in one of the huge growth metropolitan areas, like Las Vegas (adding 150 people per day) or Houston (adding 330 people per day). ?
My grandmother lived in New Kensington, a small industrial town outside of Pittsburgh from WWII to about 1990.
Quote: pacomartinStatistically, roughly half the people in the USA live in one of the 51 metropolitan "statistical areas" with over a million people. Out of these 51 areas, 5 are losing population over 2000-2010.
1) New Orleans-Metairie-Kenner, (loss 40 people per day on average)
2) Detroit-Warren-Livonia, MI (40 people per day)
3) Cleveland-Elyria-Mentor, OH (20 people per day)
4) Pittsburgh, PA (20 people per day)
5) Buffalo-Niagara Falls, NY (10 people per day)
While generally New Orleans, and Detroit are portrayed as disasters you hear a lot less about the other three.
Presumably without population growth Cleveland, Pittsburgh, and Buffalo were spared the worst of the rampant land speculation and real estate bubble. Not that I said, spared the worst.
If you live there, do you feel left out by not being in one of the huge growth metropolitan areas, like Las Vegas (adding 150 people per day) or Houston (adding 330 people per day). ?
I've lived in both. Lived in PIT. Lived in Rochester, a clone of Buffalo and was in Buffalo so much at the time I might as well have lived there. I saw urbam Detroit in the still-booming 1980s and even then it remains the worst urban devistation I have ever seen. I feel PIT survived because of the Holy Roman Empire system of governments we have here. Smaller is better during these times. While it makes it harder to make deals with large employers (the legendary US Steel Homestead works spanned 3 towns) it gives better local services. It is harder to ignore people complaining about the empty building when you live a block from them and went to school with them. A few are really broke and near state takeover but better to have a 10,000 Boro be taken over than say Detroit.
OTOH, I lived in Phoenix when a person moved there every 15 minutes. Jobs were incredibly easy to come by. I had 15 interviews in one week once and a job offer an hour after applying never meeting the employer. That is when times were good and I have skills employers need. Back here in PIT I have had bumpy employment the past 3 years but almost never out of work totally for long. Skills in a booming industry help even in recessions.
So I will put it this way. Like so many choices, "it depends."
If you are just out of college and the economy is good all over, you are far better in the big booming city. I wish I had been in a place like Phoenix right out of college. While I turned out OK if I was there I would have gotten into banking and finance sooner.
If you are established and have skills the no-growth town allows a higher standard of living at a lower price.
No skills in a bad economy you are dead no matter what,
Quote: pacomartinStatistically, roughly half the people in the USA live in one of the 51 metropolitan "statistical areas" with over a million people. Out of these 51 areas, 5 are losing population over 2000-2010.
1) New Orleans-Metairie-Kenner, (loss 40 people per day on average)
2) Detroit-Warren-Livonia, MI (40 people per day)
3) Cleveland-Elyria-Mentor, OH (20 people per day)
4) Pittsburgh, PA (20 people per day)
5) Buffalo-Niagara Falls, NY (10 people per day)
If you live there, do you feel left out by not being in one of the huge growth metropolitan areas, like Las Vegas (adding 150 people per day) or Houston (adding 330 people per day). ?
I'm not a city-boy, but I do claim Buffalo as my hometown, if for no other reason than to spare a 10 minute explaination of where I DO live. The City of Buffalo, to me, has always been an image of disgust (and part of the reason of my loathing of the Sabres/Bills). I'm not old enough to remember Bethlehem Steel, the General Mills silos, or any other of the now abandoned and rotting industry along the lake shore in it's heyday. All I remember from my youth is trips there coming down Rt 5 into Lackawanna (just outside Buff) and seeing a wasteland of these husked out giant buildings, dilapidated railroad tracks, and the smell of the interior of a colon (think it was a coke plant, maybe SOOPOO can correct me). The interior of the city was better, at least by looks, but of these giant office towers and business buildings, you'd find that maybe 1 or 2 of these floors of a 23 floor building were being used. It's just such a waste. Hisorical buildings left in disrepair until they crumble, then they need to be torn down on the taxpayers dime, then someone buys it for pennies and throws up another pay-to-park lot.
If I were to personify Buffalo, it'd be like a family member that has all the skills and talents to become something great, but instead lives on welfare, blows coke, is mean to little kids, and purse snatches little old ladies. You should love them cause they're family, you should love them because they have potential, but you hate their f*ing guts.
The stretch of Rt 5 leading to Buffalo hurts my soul. It's right on the lake, from Woodlawn to city limits is about, oh, 10ish miles. This entire 10 miles is fenced off, broken down, weed filled, garbage filled, dead equipment filled wasteland. Lakefront property in a city should be SOMETHING...industry, shipping, recreation, green space....SOMETHING....but here it's a dump. In my 30 years, the only 'progress' I can speak of is they erected 6 or 7 windmills on the shore of this disaster. Always we here of 'ideas' of 'plans' or some new way to revitalize the area, and always it sits in a heap of it's own mess.
So people leave. I say good for them. We are promised improvment, and received the shattered remains of the promises. We're taxed more and more, and receive less and less. We can't even keep parks open. It sucks, because the PEOPLE of Buffalo are gold. The sense of community, the working class, do-for-yourself, help your neighbor, pick yourself up by the bootstrap culture is strong in Buffalo. They're survivors. They thrive in no economy, terrible weather, and poor infrastructure. Taking a beating from the Gov is just too much. So I say leave, and be better for it. I'm here to enjoy my grandparents in their final years. And then I'm gone too. And I'm to the point I hope the entire city crumbles into the lake. Just like the coked out family member, sometimes you gotta let 'em destroy themselves for them to see the light.
Do I feel left out? It's hard to care anymore. /rant
Quote: FaceI'm not a city-boy, but I do claim Buffalo as my hometown, if for no other reason than to spare a 10 minute explaination of where I DO live. The City of Buffalo, to me, has always been an image of disgust (and part of the reason of my loathing of the Sabres/Bills). I'm not old enough to remember Bethlehem Steel, the General Mills silos, or any other of the now abandoned and rotting industry along the lake shore in it's heyday. All I remember from my youth is trips there coming down Rt 5 into Lackawanna (just outside Buff) and seeing a wasteland of these husked out giant buildings, dilapidated railroad tracks, and the smell of the interior of a colon (think it was a coke plant, maybe SOOPOO can correct me).
There is a coke plant near Lackawana. If it was a coke plant the smell would be similar to the sulfur smell of burning matches. Buffalo has basically moved to Amherst/Clarence, which is where any good company wants to be.
Where did you live there?
The only time I ever notice it is when I'm at a Sabres game. Where I live in Amherst (Williamsville) it looks like any suburb with parks, shopping malls, ice skating rinks, golf courses, etc...
