Archive for June, 2008
If a military family bought a home with a conventional loan (not subprime) as the subprime crisis was building, the military family will be hurt more than their neighbors. The primary reason is that servicemembers will be transferred on a regular basis. When home prices increased it was not a problem. Knowing that you would be transferred somewhere else in three or four years was a given. What happened from 2006 through today was a shock to everyone. However, as home prices drop everyone must wait until the market turns around. Servicemembers cannot wait.
More job losses at the top ranks of Lehman Brothers are no surprise. Some executives are weary, just like their customers and most other Americans. Lehman Borthers is shaking up its top ranks amid deepening concerns about the firm’s financial health. Just before the market opened, New York-based Lehman said its president and the architect of its growth spurt in the middle of this decade, Joseph Gregory, will step down and be replaced by equity trading head Bart McDade. And the executive who has led Lehman’s aggressive defense against questions about its accounting and balance sheet, finance chief Erin Callan, will step aside in favor of co-accounting chief Ian Mowitt.
A random survey of homeowners asked the following questions: (1) Who is your mortgage company, and (2) How would you rate their customer service. It seems as though Wells Fargo may be the next troubled lender if their fear factor and desire to call mortgage holders before the due date is any indication. Some homeowners that were on vacation during spring break reported that Wells Fargo paniced and called them before they returned from vacation. Their payments were not late nor were they past due.
The U.S. Securities and Exchange Commission, responding as credit-rating companies face pressure over subprime mortgage losses, proposed rules to prevent conflicts of interest and help investors distinguish rankings on asset-backed securities from other types of debt. This comes only days after we revealed that bullish forecasts from big investment banks like Morgan Stanley caused gasoline prices to rise 20 cents in one afternoon. (see article) Preventing conflicts of interest at this point in time is like trying to get the wild cat bag in the bag. A little late is it not? The SEC proposed today that raters such as Moody’s Investors Service and Standard & Poor’s Corp. be barred from guiding investment banks on gaining top rankings for structured- finance offerings.
Maybe it’s just me. Perhaps my old age made me cynical. Maybe it is because my friends gripe and complain about less and less disposable income. In my mind the country is in worse shape now than it was since the 1930′s. At least back then it was America in trouble, and America rescued itself. If you study the great depression you see that the economy was functioning, but it functioned on such a low level that it could not sustain the population. Ohio is like that today, in some ways. Subprime caused problems, but one would think that solutions touted by the news media and federal and local governments are really doing a lot of good. Here is a reality check, quoting one homeowner: