Housing Market Meltdown: Who Is To Blame?
Surprise, surprise, surprise, the havoc in the subprime mortgage market is spreading to the rest of the mortgage market. Credit is tightening up at the fastest pace in decades and some of the high flying hedge funds are now bankrupt. This has sent the stock market plunging and house prices are falling in large parts of the country. We may not have yet entered the full meltdown phase of the housing bubble; still it is a good time to start assigning blame.
The media stand at the top of the list. While there were occasional pieces that hinted at a possible bubble, the mostly widely cited expert on housing was David Lereah, the chief economist of the National Association of Realtors (NAR) and the author of the book Why the Housing Boom Will Not Bust and How You Can Profit From It.
For some reason it did not occur to reporters who cover housing that the chief economist for the NAR may not be a neutral source of commentary on the housing market. Similarly, the chief economists for the Mortgage Bankers Association and the National Association of Homebuilders were also frequently used as sources in stories on the housing market.
Of course it is perfectly reasonable to present the views of representatives of trade associations, however these views were rarely balanced with the views of housing skeptics. As a result few homeowners or homebuyers, even those who follow the news closely, ever thought it was possible that house prices could plunge for a sustained period of time. The consequence is disastrous for tens of millions of homeowners who will either lose their home, or much of their life’s savings, or both.
But the media bear only part of the blame. The economics profession deserves a very large share as well. There were very few economists warning about a housing bubble. Yale economist Robert Shiller, who (like me) also warned about the stock bubble, gets very high marks, but the list of housing bears in the economics profession is a relatively short one.
In fact, some very prominent economists, such as Alan Greenspan and Ben Bernanke have gone out of their way to insist that there was no housing bubble. It was Greenspan’s congressional testimony in 2002, insisting that there was no bubble, and the fact that it made no sense, which first led me to closely examine the fundamentals in the housing market.
The track record of the economics profession on key economic issues has not been very good in recent years. While the housing market meltdown appears to have caught the bulk of the profession by surprise, the same is true of the stock market meltdown seven years ago. The Federal Reserve Bank of Philadelphia surveys 31 leading economic forecasters every six months. In December of 2000, just before the onset of the last recession, the median forecaster surveyed projected strong growth for both 2001 and 2002. Even more remarkably, they projected that the stock bubble would continue to expand with the median forecast for December 2002 putting the S&P 500 at 1640, more than 7 percent above the bubble peak reached in March of 2000. (Its actual value at the end of 2002 was 899.)
The Fed and its pack of sycophantic economists have spent much of this decade patting themselves on the back for keeping inflation under control. While none of us want hyperinflation, the economic costs associated with the inflation rate rising by half a percentage point are dwarfed by the impact of the rise and demise of an $8 trillion housing bubble, or a $10 trillion stock bubble.
In addition to the losses to tens of millions of homeowners, crashing property values and soaring foreclosures will mean plummeting property tax revenues for state and local governments and school districts. The debt unwinding is likely to hit many already underfunded public pension funds, which turned to hedge and private equity funds as a desperate measure to raise returns.
And, the housing meltdown is almost certain to lead to a recession, and quite possible a very severe one. We used the housing bubble to escape from the stock crash recession. It’s not clear that there is another potential bubble that can prevent a period of prolonged downturn.
The bright side of this picture is that we should have plenty of time for finger pointing as we weather the slump. That is also the bad news.
There really isn't a meltdown-- I would say a housing bubble deflation is a more appropriate expression. Unlike stocks, etc. housing can never become worthless (rare exceptions exist when the property is destroyed, e.g., Hurricane Katrina, or rendered permanantly unlivable, e.g., Love Canal)
Nor is the subprime mess spreading to prime (a prediction continually made and proven untrue). The only prime mortgages which appear to be in any trouble are, unsurprisingly, ARMs. Defualts on other primes are limited to the traditional causes, e.g., job loss. Also, even the majority of subprime mortgages will not go into forelosure; the problem is mainly found among ARMs and their exotic cousins.
On the other hand the entire mess may well be prolonged longer than anyone currently thinks, due to the fact that too many sellers are refusing to lower their price to true market levels.
I don't expect a recession out of this (has a housing slump ever triggered one before?); we probably won't see a recession until about 2010-11 (just in time for a Democrat president to get the blame). But I do expect a long period of minimal growth and stagnation while the whole business sorts itself out.
August 6, 2007 4:01 AM | Reply | Permalink
Was it a housing boom or a mortgage products boom? The last time these sorts of loan products--100 % or 100%+, ARM's, et al--were popular was just before the great depression. Yikes. Another thing to worry about--how much of your pension is tied up in mortgage securitizations?
August 6, 2007 6:02 AM | Reply | Permalink
This could be pretty nasty, just because this generation of financial analysts simply don't know what to do in this sort of situation. We have had funds and funds of funds levered up 10-12 times, with 26 year-old MBA's who have never heard of a mortgage default in their lifetime writing the research memos... Could get interesting.
We will see if that whole 'efficient markets' thingy people seem so fond of is finally allowed to work its course on financial firms for a change, or if Bernanke caves and goes on a 'free money for rich people!' campaign.
August 6, 2007 6:48 AM | Reply | Permalink
DickTater here.
I would love to blame Big Business, Big Finance, Predatory Lending....you name it. What I do not want to hear is blaming the avg joe. That is what republicons and pro-business fools love to say over and over. "what about personal accountability?"
Well, they should be quite embarrassed to say such things, but has it ever stopped them before?
Wierdly, for once there is a modicum of truth there. Avg Joe has been somewhat complicit in this housing quagmire.
Let us look at all the major financial fiascos (recessions, depressions, etc.) and you will NEVER find Avg Joe at the root of it. Always, pompous asses in 3piecesuits have used unbridled greed and blind ambition to run our markets up against brick walls. The very people who look so respectable, and talk about the "adult" view, and seem to represent the 'know what they're talking about' set - are the same jokers driving our train right into a granite wall.
Era after Era.
Give me anyone who has a probusiness agenda and I will tear them apart. Pro Business? How much more of our personal, private, public lives must be given over to business? You and You and You There....how much of your money is going to businesses RIGHT NOW? If you are like me, almost 99% of my money goes into Corporate Coffers. How much more ProBusiness can we be? Aside from Taxes (which corporations have become infallible experts on plundering the treasury) ALL my money goes into business pockets. Most americans do the same.
You need to laugh down anyone spreading the Pro Business manure. You CANNOT utter platitudes about how you believe capitalism is OK and that you believe in a Free Market. The evidence is all around you, screaming out that it is NOT a free market. Capitalism has run amok as we always KNEW it would. It has never been anything but a ravening wolf....barely constrained. Always breaking free and devouring US citizens. At times it appeared we had thrown chains over it, tamed the beast. Always it came back and broke loose and wreaked havoc. Now, we can't get it back in it's cage. And we should have known better. We DID know better.
But all that money can buy a lot of things. Platitudes, brainwashing, condoning horrible behavior, inculcating that behavior into Joe Sixpack so that we have poverty stricken, no-healthcare americans riding around in a pickup truck (running on fumes) waving Confederate Flags and whoo hoooing about Right WIng candidates and voting for the Corporatists.
Think Regionally. Act Regionally
August 6, 2007 7:33 AM | Reply | Permalink
The real culprits have long since converted their inflated bucks into real property leaving the bulk of investors and homeowners to twist in the wind. They knew exactly what they were doing and how to do it.
Who are they? ...get Greenspan’s rolodex.
August 6, 2007 7:40 AM | Reply | Permalink
I'm going to have to disagree, there IS a meltdown. Part of what has fueled the housing boom over the last decade has been that all the creative mortgages enabled people to buy who otherwise would have been unable to buy. Or, it has enable purchasers to buy more expensive homes. But these people are going to have to now downsize, or (oh my!) rent. This is going to drive down home prices in the short term, and the effect is going to be immediate. To me, it's a meldown.
August 6, 2007 8:26 AM | Reply | Permalink
One result of the housing bubble is that real estate prices and their corresponding property taxes have skyrocketed. The high prices are making home ownership impossible for lower income buyers except with risky sub-prime mortgages. The increasing taxes are making it hard for some longtime homeowners to keep their houses. Meanwhile the speculators have flipped their property and moved on. My neighbors in Chicago made $100,000 in 2 years and did only cosmetic things to the house before they sold. They left the worn-out roof, leaky family room and foundation problems for the next owners who sank at least $200,000 into the place.
There are new condo buildings all around with For Sale signs on them. Some of them are for sale again before the complex is finished. These units were not purchased for residence. They were investments. The city and county are all too glad to have higher property prices. Those prices allow the taxing bodies to raise their assessments for everyone. If the house next door sold for $1 million+, my taxes go up too, even if I haven't done anything to the house for 15 years.
The sub-prime lending crash corresponds to high inflation in the real estate sector. The gamble with interest-only loans is that the value will increase faster than the interest being paid. When the bubble deflates, the value is often less than the debt and the borrower has no equity built up.
August 6, 2007 8:34 AM | Reply | Permalink
The housing fiasco took a major turn for the worse when American Home Mortgage shut their doors. The reality is this; The credit markets are frozen. Lenders do not want to buy any loans that are not Fannie/Freddie. This will eliminate MILLIONS of home buyers from the market. Laws of Supply/Demand will take hold. But the last few months will be nothing compared to what is about to hit....when the "new" underwriting guidelines begin to take hold. Deflation in a big way. The Fed WILL be foreced to cut rates this year.
August 6, 2007 8:48 AM | Reply | Permalink
I agree with Dean that the mainstream media--and professional economists--should be blamed for failing to warn the public. Typically, they trumpted the fact that housing prices were rising as good news. Even now, many are trying to say that the meltdown is almost over.
Bloomberg, to its credit, understands the
implications of the collapse. Today,Bloomberg news reported that "Default rates for non-subprime mortgages [these are mortgages held by people with good credit] will jump in the next year as delinquencies that roiled subprime debt become more commonplace among homeowners with better credit, said Friedman Billings Ramsey Group Inc.
"Mortgages with adjustable rates and other payment-changing features may also boost defaults. About 1.1 million foreclosures will result from various resets on all ARMs made in 2004, 2005 and 2006, according to a March study by Santa Ana, California- based title insurer and realty-data company First American Corp"
Meanwhile, as home values fall, families feel less wealthy--and are likely to spend less. Consumer spending has kept this economy afloat for a long time, with consumers spending more than they earn. But now the shopping is slowing
. Auto sales in July were at their lowest level for the month in nine years.
If consumer spending slides, the stock market will fall further--making middle-class famliies who watch $60,000 in a 401-k turn into $45,0000 feel even poorer.
These are signs that we are heading for a recession.
August 6, 2007 8:58 AM | Reply | Permalink
SHODDY BANK FINANCIAL PRACTICES ANNUALLY SPILL the REQUIREMENTS of MEDICARE and SOCIAL SECURITY
As regularly as the sun rises in the East, capitalism, as practiced in America today, spills, wastes or loses more financial resources every year than the total requirement of Medicare and Social Security combined. Greed leads to excessive risk taking. The U.S. financial industry regularly goes on speculative binges that enrich work-a-day bankers and thieves alike until the (always predicted) pyramid-like lending excesses end in catastrophe. I suggest a way out. Add, similarly to a Value Added Tax, one one hundredth of a per cent tax on financial transactions and the social programs for the average Joe and Jane would be well funded.--Who do you think (always, always, always) pays for the shoddy greedy self serving financial excesses in the first place? You guessed it, the same Janes and Joes that get sucker punched with the old, "Gee whiz, there just doesn't seem to be any money left over for you."
--cognitorex--
exorcise your right, vote!
August 6, 2007 9:17 AM | Reply | Permalink
On the other hand, this is exactly the time for society not to be investing in bigger homes and big autos. Both need to be re-engineered for energy efficiency. The economy over the longer term will be better off if purchases are delayed now
while better engineering practices are developed and implemented. To have continued the pace of developing large tracts of McMansions with SUVs parked in front would have been wrong.
So for long-term investors, this may be taken not as a sign that capitalism is hanging itself from its own rope, but rather that capitalism is (gasp) turning in the right direction.
August 6, 2007 9:28 AM | Reply | Permalink
"Excessive risk taking"? I'm all for taxing hedge fund managers at income rates, rather than the capital gains rates they currently get away with, and for fully funding education and health care, so that these are available regardless of income. But letting government judge or try to control what risks adults take with their own financial resources is itself an excessive risk. The government controls are likely to be applied in the wrong amount, in the wrong places.
For any kid to want to be an artist, for example, is an excessive risk, in that most will never make it. But to have the good artists culture depends on emerge, there have to be lots of kids taking this "excessive risk" rather than simply going to trade school or getting an MBA. The same thing applies to entrepreneurs and investors. Even if most strategies fail, the successes are worth so much that those who've taken "excessive risk" and failed should be honored as heroes, not condemned.
August 6, 2007 9:36 AM | Reply | Permalink
Rising property valuation are not the cause of higher property taxes. Say a town has ten homes, each is valued at $100,000, and the town needs to collect $10,000 to cover necessary public services. It will set rates at $1 per $100 of valuation, resulting in $1000 of taxes per home. If those homes are revalued to $1,000,000, the town will set the rate at $0.10 per $100 of valuation, resulting in $1000 of taxes per home. As long as all the equivalent homes are given equivalent revaluations, the taxes paid do not change with the valuation of the homes.
However, if half the homes get revalued to $1,000,000 and the other 5 stay at $100,000 then the tax burden will move almost entirely to the higher-valued homes. That's the sort of thing that happens under California's Proposition 13. But most of the country doesn't work that way, so for most of the country home valuations have nothing to do with property tax increases, except to the extent that politicians take advantage of the shifting numbers to mask real rises. But that really happens on the municipal budget end, not on the property valuation end. Blaming it on property valuation - even on the real estate bubble - is a distraction from who's really doing it to you.
August 6, 2007 9:37 AM | Reply | Permalink
DickTater here.
cognitorex is RIGHT ON. I just want to re-emphasize what I said earlier. Era after Era, the same 3piecesuits run our economies into the ground.
Although Avg Joe has had some complicity in THIS particular housing/lending fiasco - by sinking all their savings into homes and expecting huge returns when they sell a year or two later....
that still doesn't come close to the culpability of the bankers and lenders and Fed. Cognitorex has a good policy of taxing the financial transactions.
The point of this article was affixing blame. Watch as all the 3piecesuits try to claim that NONE of this was their fault. They will pass all the losses on to us, the people. And all the reichwingers will as usual, try to affix all the blame onto our foolish joes and janes.
When the stock market is rigged, when your 401ks are just used as personal savings accounts by their managers and bankers, when you can't get better than 2.5% interest on savings....what were people supposed to do? Where can we invest? Corporatists have taken our jobs and factories. They hire illegal immigrants. The dollar is almost worthless (good if you are an exporter). Avg Joe is not an exporter....his milieu is America. The 3piecesuits are offshoring themselves and are able to make global changes in their portfolios to offset the gutting of america. What is an avg joe supposed to do?
Yes, people have acted foolishly - but the largest powers in the country were egging them on to do it. Just like they always have done. When are we going to face this fact? When are we going to learn? As long as 3piecesuits are allowed to continue, as long as we countenance them as Better Than Avg Joe, as long as they are allowed to keep spinning their yarns and evading their proper comeuppance - we should all learn to like the taste of roadkill and get our intestines used to 3rd world conditions because we are heading there at a breakneck pace.
Think Regionally. Act Regionally
August 6, 2007 9:40 AM | Reply | Permalink
The real bubble is in money. In the '70's inflation percolated through the economy with prices and wages rising together. Globalization has kept wages and consumer prices down, so the flood of cash goes into investment. After the economy reached the point of being built out, this money then started inflating assets and being lent out to anyone promising to repay. Now the limits have been reached, what's next? Does the dollar melt?
We are on the verge of a political, economic and monetary meltdown. It will provide the opportunity rethink how we construct our society. Here is an idea that might be useful;
http://www.exterminatingangel.com/index.php?option=com_content&task=view&id=203&Itemid=118
August 6, 2007 9:48 AM | Reply | Permalink
Let me suggest one other factor. In a place like New York, where the boom seems particularly pronounced, it's in part driven by the nature of the unequal economic recovery. Some people just have lots of money. They purchase freely; more buidings go co-op; more condos get built where middle-income industry or low-income housing might have stood; and the combination of rapidly rising prices at the high end and sharply increasing scarcity of housing available in the middle range has a trickle down pressure to price increases. In other words, the bubble isn't entirely separate from other aspects of the Bush handling of taxes, corporate regulation, and the economy.
I do tend, though, not to worry as much about whom to blame. Bubbles happen, and sure as usual public perception that helps feed bubbles gets reinforced by the mass media. One should worry more about how to keep a bubble from unduly crashing the economy as a whole. That's where I'm most concerned about policy failure and, while I'd like to see changes, under Bush I suppose we'll have to settle for assigning blame.
John
http://www.haberarts.com/
August 6, 2007 9:50 AM | Reply | Permalink
Your first paragraph is right on. Your second paragraph appears to be the all too common wishful thinking - along with a solid dollop of denial. Denial to what capitalism REALLY is.
This country has done a really good job of brainwashing EVERYONE into accepting capitalism as a neutral or even benign presence. How could a dog eat dog, to the Victor Go The Spoils, Might makes Right, Winner Takes All economy be the choice of a free people? Well the easy answer is we are not a free people, and even in our free-est moments we were being bought and sold by capitalists.
We have to reconcile with what a debased, depraved, and inhumane animal is capitalism. As long as you keep spouting things like Capitalism is OK (Good, Benificent, Neutral, doesn't pick favorites) or that it has the capability to "turn in the right direction" you will be continually disappointed and disillusioned and you will have done You and Yours a great disservice.
Democracy does not equal capitalism. Capitalism is NOT the inevitable cohort of republics or democracies. Democracy is a governing strategy. Capitalism is an economic system. The two are NOT inseparable. Unfortunately, very few people are in on that secret.
Think Regionally. Act Regionally
August 6, 2007 9:51 AM | Reply | Permalink
Re: This is going to drive down home prices in the short term, and the effect is going to be immediate. To me, it's a meldown.
We may be arguing over semantics. I don't disagree at all with your analysis, but to me a meltdown implies a complete collapse, as when a major corpration sees its stock go from some respectable figure down to (or near to) $0. This will not happen with housing, for the simple reason that a house retains considerable value (absent disastrous events) no matter what happens in the housing market. It may not be worth the 300K the owner dreamed of selling it for, but it will still be worth, say, $240K.
Re: This is going to drive down home prices in the short term, and the effect is going to be immediate.
Here I disagree somewhat, and I actually wish this were true. We'd be a lot better off if housing prices would abruptly deflate to their real market levels and that was the end of it. Unfortunately, sellers are stubborn. Some may not be able to sell at a lower price (because they owe too much in the house) but many (most I suspect) having been told once that they could get $XXX,XXX.xx are very rseistant to selling for significantly less than the number (a few exceptions exist of course, but they are too few). Even banks and mortgage companies are resistant to dumping foreclosed properties for too cheap lest they glut the market and hurt themselves even worse (that REO property portfolio counts toward their assets bottomline after all; in some cases they may be better holding it than selling it for too little). All of this is going to prolong the slump for a fairly long time.
Re: Was it a housing boom or a mortgage products boom?
Both. Look at all the new subdivisions and condo projects that got built even in areas where there was little demand for new housing.
Re: Lenders do not want to buy any loans that are not Fannie/Freddie.
The warehouse banks will still buy loans, but they will limit their purchases to prime mortgages, insisting on decent FICO scores, respectable (under 90%) loan-to-value ratios, and good documentation of borrower income and assets. Insistence on PMI will make a big come-back too. This will of course impact people who do not fit in that category, although HFA loans should help some of them with home purchases as in the past.
August 6, 2007 9:55 AM | Reply | Permalink
"Meltdown" may be a little strong at this stage in terms of the housing market alone. But if you look at the credit markets further upstream, there is a meltdown. Home financing companies are dropping like flies. And it's not every day that a company like Bear Sterns is up against it.
But I think your point about the prolonged nature of the fall-out is probably the most important. On the one hand, clearly price-stickiness in the real estate market is going to draw out the correction. And unless the Fed continues to tighten, the rate of foreclosures is unlikely to rise substantially, so again, it points to an extended slow-down rather than an abrupt correction.
However, I go back to my original point about the state of the institutional credit markets. This market is f*cked with a capital F at the moment. The key knock-on effect is a severe drain on liquidity, which in my view will percolate across all asset classes, over the course of the next 3-6 months (it would be quicker if structured credit products were easier to value, but they aren't and no fund manager I know of would pre-emptively remark his portfolio downwards).
One effect of this will I think be a weak few months ahead in equity markets. There are going to be many fewer mergers and acquisitions - LBO opportunities are gone and there are apparently 1.3trn of fees locked up in investment bank pipelines at the moment... absolutely no good there, purely hopeful and hypothetical future profits.
And as the wealth effect of the stagnant real estate market is factored in, corporate earnings forecasts are being slashed by between 50 and 60 percent.
So for me, there is a vicious cycle at work here (fyi, commodity prices are on the rise again), which could culminate in a recession this year. If you look at the financial world asset by asset, on their own none of the problems probably amount to much. But the cumulative effect of the liquidity crunch and the likely downstream effects on consumer behavior - and the way these two factors could feed off each other - make for a unsettling prognosis.
The only mitigating factor - and this is a view that I have heard from a number of eminent analysts - is that the credit losses have been widely disseminated. So whilst many people will have to eat a slice of humble pie, there is not a systemic problem.
I'm not convinced by the argument - partly because of the wealth effect at the micro-level, but mainly because the one body with the capacity to restore confidence and stimulate the market, the Fed, is not in a position to cut rates. I imagine Bernanke is going to aim for a soft landing over the coming months, but even without an adverse shock, he'll do well to achieve it.
It's possible Bush will pitch in with a token tax cut, but can't see for a moment how this will gee up a bunch of people who've either lost their house, seen their monthly mortgage cost increase, or whose priority at the moment is figure out if as a money manager they have 1st, 2nd or 3rd degree burns.
(Sorry for the paucity of links, but this is all researchable on the Bloomberg news website, www.bloomberg.com)
August 6, 2007 10:01 AM | Reply | Permalink
I do think its a meltdown, and we haven't even see the worst of it. Reset rates are going to kick in for huge numbers of people later this year and for the next few years. It's gonna get a lot worse before it gets better. But so far, its taken out some mortgage companies (a new one today), Bear Stearns hedge funds got wiped out, and tons of money got lost in others.
The securitization of mortgages has meant that this will, and already has, spread itself far deeper and stronger than a regular "housing bust". It's not just a matter of people not being able to sell their homes, it's also a matter of people across the country invested in that home as well, with all that entails.
August 6, 2007 10:17 AM | Reply | Permalink
I also want to say that the Bush Administration talked a lot, and took a lot of credit for, increased minority-homeowner rates. You don't see them talking about it much now, though. Like so many things with this Administration, it was all smoke and mirrors, a good show with a rotting core.
August 6, 2007 10:19 AM | Reply | Permalink
"We used the housing bubble to escape from the stock crash recession."
There was an old lady who swallowed a fly . . .
August 6, 2007 10:30 AM | Reply | Permalink
I agree with your second paragraph. Not sure the first one resembles reality - not in my municipality at least (NY). Occasionally you see a municipality cut property tax rates but it's pretty rare.
August 6, 2007 10:37 AM | Reply | Permalink
Well said Dick Tater (dmihm1.) You have it right.
I asked a rock ribbed conservative software co executive three piece suiter friend of mine about letting the public have a 'taste' or a wee percentage VAT on capital flows.
He replied that it was an absolutely correct moral and financial thing to do.
"However", he said, "unless you can guarantee that the tiny percentage used to get this mechanism started/passed can not subsequently be increased as the politicians get their hands on it then it should be considered dead on arrival."
Interesting?
Them and Us: A Capital Tax Plan
.
(Wall Street firms are expected to pay out a record $23.9 billion in bonuses this year. 12/20/06 USA Today)
Place a one one hundreth of one percent Value Added Tax on all capital flows.
'Them' enrich themselves by taking a bite out of America's capital flows at every instance while 'Us', the creator's of this wealth, need Moms and Dads working multiple jobs to eat and provide the capital for this system.
As our capital washes around the globe for economic enterprises, both good and bad, and hedging and currency (and other asset) speculation, there is no reason Us couldn't charge a way tiny `rent' for this resource.
Social Security and Medicaid could thus be amply funded and capitalism would manifestly not miss a heart beat.
--cognitorex blog--
Labels: hedging, speculation, Two Americas, VAT Tax on Capital flows
August 6, 2007 11:05 AM | Reply | Permalink
As a member of the reality-based community, I join in the observations of the several commentators above who believe Dean Baker's hyoerbolic post overstates the current situation. "Meltdown, plummeted, havoc" etc. are all hyperbole. Stating that "some of the high flying hedge funds" have gone bankrupt is gross overstatement - the Bear Stearns funds that filed are less than .01% of hedge funds in the US. Frankly, I view some level of bankruptcies among hedge funds as healthy cleansing. Eliminating speculation on credit is good.
I also find the "ad hominem" attacks towards economists with whom Dean Baker disagrees unconstructive and deserving of reproach. Please stop them, Dean.
For the rest of the country, the vast amount of homes in the US are not going to be put up for sale anytime soon and thus this will be a nonevent for the vast majority of homeowners. The sharp rises and falls in valuation are limited to certain areas of the country - Calif, Texas, Florida mainly - and others will see little impact on valuation. Nationwide, we are looking at perhaps a single digit decline in prices in the short term, and I don't think that is anything approaching a meltdown. In my lifetime, every market - bonds, stocks, commodities, precious metals - has gone through a substantial double digit price drop and I see no lasting harm to the economy from any of those events.
A couple of anecdotal notes, I have seen the Drexel bankruptcy, Orange County bankruptcy, the LTCM liquidation, etc. In every case, the values of assets that were described at the time as "toxic" actually appreciated substantially afterwards, in some cases within one year and in others three to five years later. Further, as the Wall St Journal notes today, 2 years ago, the credit derivative market was pricing in a 100% chance of a GM bankruptcy in 5 years. So far they are wrong and the forecast is down to less than 50% now. Asset values and credit risk may lurch in the short term but the economy has lways motored on. In the near term, I agree with Dean that there will be a negative impact on growth and even a recession. Not exactly a shock more than 5 years since the last recession ended. And it should help the Democrats in 2008 - :).
August 6, 2007 11:20 AM | Reply | Permalink
Almost everywhere in the country real estate taxes payable are the result of the tax rate (millage rate) times the assessed value of the property -- not its market value. Changing real property market values cannot affect real estate taxes unless there's a municipal revaluation.
When was the last time your municipality did a reval?
August 6, 2007 11:20 AM | Reply | Permalink
Excalty which "bubble" is being disucssed? There is no doubt that the big public homebuilders are in trouble, or at least their stock prices are, because they overbuilt. Are home prices going down? Undoubtedly in some places but not in Silicon Valley, where my brother is a real estate broker and the companies there represent the "new economy", not in New York City where I have been in real estate for 25 years. Altanta I gather the market is gettign soft. Part of the point is that there is not a national real estate market. Additionally, unlike stocks if ones home goes down in value you may feel poorer but you can continue to live in the home, and thus get value, until the market recovers.
The question is borrowers, lenders and loan packagers and how much leverage is involved overall. It seems unlikely that too many people will lose their homes. The bigger issue is what will happen to all the financial institutions, if anything, and the economy as a whole as a result of a lack of proper due dilegence.
Daniel A. Greenbaum
August 6, 2007 11:30 AM | Reply | Permalink
One of the first things done by the Booozeshies was to terminate bankruptcy for Avg Joe...yet extend and enlarge the role of bankruptcy for Corporations.
Many corporations leapt at once to the ready, and declared bankruptcy. They then used it as a cudgel to smash pensions and unions. Then they come back out of bankruptcy. Smile!
Not sure how this bears on your points MT57...but just another gross Them vs US culture crackdown.
And think, this has to be having an effect on the housing markets, too....since it is nigh impossible to file for bankruptcy. These guys (Big Biz, Big Finance) clean up in the bad times, and just explode with money in the "good times".
Good times is when they have fixed (with lobbyists) all the game to go their way, deregulated their industries, written all the laws using their lobbyists, written the tax laws, and cemented their hold on their customers while making sure their customers never have any power over them.
Anyone trying to talk their way out of ANY OF THIS using economic principles is a laffer. There are no rules, the goalposts keep shifting, THEY make the game up as they go, they are unanswerable to law like YOU and ME. Don't try sounding reasonable or start quoting stats. Don't explain market forces and global trends.
This is pure greed and manipulation by those extremely well-placed for said manipulation. "Pay no attention to the man behind the curtain" campaigns of every kind BLANKET our airwaves and political discourse. Judging by a lot of commenters and journos....I would say it is very effective.
Sorry to be blunt, but I think it is needed.
Think Regionally. Act Regionally
August 6, 2007 12:42 PM | Reply | Permalink
The bigger issue . . . .
It used to be the case that large "Wall Street" commercial banks performed the intermediation function (principally, loaning money), and thus, as linch pins of the economy they were thought to be "too big to fail."
But with the rationalization of global financial markets and the new found ability of corporations to borrow capital directly from savers, commercial banks are no longer as important to the health of the economy as they once were.
I say if the banks made stupid loans, let 'em go under.
August 6, 2007 12:57 PM | Reply | Permalink
I tend to agree with you. The only issue might be what ripples in the real economy would occur from a big bank going under. A political problem is that during the Savings and Loan crisis there was a lot of misinformation. Depositors then and would not be protected not shareholders and executives.
Daniel A. Greenbaum
August 6, 2007 1:06 PM | Reply | Permalink
Re: One of the first things done by the Booozeshies was to terminate bankruptcy for Avg Joe...
This is not really accurate. The new bankruptcy law (yes, I agree, it's a turkey!) was not passed until 2005, five years after Bush took office. Nor was it a brainchild of the Bush administration or even the GOP. Many (too many) Democrats signed on to it happily, in fact back in the 90s Bill Clinton had stated he would sign a version of it being pushed through Congress then (it stalled before it reached him). Finally, it did not eliminate bankruptcy, but did push more people into Chapter 13 (partial payback) and increase the fees and costs and general red tape of filing.
August 6, 2007 2:23 PM | Reply | Permalink
It's Ole Dean doin' the "I-told-you-so" dance, again. Comes from selling out two years too early* and realizing later that you'll never -- never in your lifetime -- get back in for the price you sold at.
Sort of reminds one of folks who recognized "irrational exuberance" when they (and Greenspan) saw it and sold the market in December 1996 waiting for prices to plunge. And plunge they did; unfortunately for those sellers, not anywhere near to the prices they'd sold at.
* Or was it three years too early?
Later: Hi, Florida Democrat! Listen; I've got a stopped clock. It's an old fashioned one so it's right not once but twice a day. Wanna buy it?
August 6, 2007 2:47 PM | Reply | Permalink
This situation is an interesting study in human nature. The reality is we needed prices to pull back in housing. Young couples were getting priced out of the new home market. Ditto for a lot of your essential public service professionals that don't make big paychecks.
Nobody praised the mortgage system we had in place during the 90's for getting so many people into a new home, but there is plenty of finger-pointing going on now.
Americans always tend to over-react to bad news or calamity -- like the bridge collapse in MN and the subprime problem. Trust me, home prices will be back on track in 2 years time and going up again.
August 6, 2007 3:18 PM | Reply | Permalink
Interesting times. So far movement in prices have been too modest to describe what is happening as a meltdown. But all of the indications are that it will go lower.
How much lower? I recently saw a national average housing price chart that plotted price per year going back to 1890. This was inflation adjusted and the average price was $100,000. What is remarkable was that from 1896 to 2002 the trend was flat. You could see some of the historical pricing booms as bumps in the curve (ie 1900's, 1960's and 1980's) but the deviation from the mean was no more than 30%. Same with the 'busts'. However, from 2002 -2005 the average jumped to $200,000. (See Shillers graph at http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif)
Based on this I think we could see prices falling on average by 50% from their peak in 2006. Now that would be a meltdown. It is not in anyones interest to pay on a $700,000 mortgage for a property worth $350,000.
August 6, 2007 4:11 PM | Reply | Permalink
I'm really surprised that no one here has brought up the folly of the current tax structure that just begs people to use their housing equity for all sorts of debt.
"Yeah, I can give you a car loan based on the value of the car, but if you set up a home equity line of credit and use that I will charge you less interest and the interest will be tax deductable."
Boy, that seems like a no-brainer doesn't it?
But what we now call a "home equity loan" our parents called a second mortgage and it was anathema to them because they remembered the Depression and how people who had played by the rules all their lives lost their homes and all their accumulated wealth.
It's long past time for Congress to address this. The words "tax deductable" are just about irresistable. It makes absolutely no sense to encourage people to use their home equity for other purposes. I bet a thorough study will find that most of the people facing foreclosures now had additional home equity debt beyond the sub-prime mortgages that are getting all the blame.
August 6, 2007 4:12 PM | Reply | Permalink
Dean Baker,
This is the simple way we got there: massive and treacherous deception by omission.
In our USA, real asset price histories that are compelling, e.g.
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html
are kept well-away from the people's attention, because such truth is 'bad for business'.
The deception by omission is done (1) by the financial services industry, (2) by the financial news media, and (3) also, overwhelmingly, by economists.
For (1) and (2) surely, the motive for deception by omission is money: the related information reaching the people is overwhelmingly that volunteered by middlemen (brokers, etc. -- who make more money from bubbles) and by the news media who are overwhelmingly funded by middlemen’s paid advertising. So, here in the USA, we get: “Do NOT show it, just average through it!!”
For (3), I am not nearly informed enough to analyze for motive(s) -- but I offer a harsh thought that I would bet is a significant factor: many more graduate students will be attractable to the study of rational behavior than to the study of herd behavior.
August 6, 2007 4:19 PM | Reply | Permalink
Sorry, I'm off the clock.
Why don't you post to the merits of the argument and contribute to the discussion? Or are you taking the position that nothing in the post is worth dicussing?
August 6, 2007 5:09 PM | Reply | Permalink
Is my perspective on this simplistic?
I basically blame the people who bought houses they couldn't afford, under stupid terms (e.g., adjustable-rate/interest only/zero-down etc), based upon ridiculous assumptions (I don't need to be able afford my mortgage when property is appreciating 20% a year here; I can always cash out before my mortgage resets). These fools were motivated by greed, and drove up prices everywhere at an unsustainable rate (making it really hard for responsible buyers to get in).
Mr. Lereah, Mr. Greenspan, loose lending practices and clever new debt vehicles may have been enablers. But let's place the blame squarely where it lies: the people who bought stuff they couldn't afford. And if they now lose their homes to foreclosure, so be it; we all must learn to live within our means. And it will be a serious mistake for Congress to bail them out - the market needs to be returned to reasonable levels, and that won't happen without some pain.
August 6, 2007 5:56 PM | Reply | Permalink
Yep. And the mentality was exactly the same. Get in now or be left behind forever!
August 6, 2007 6:00 PM | Reply | Permalink
In many areas properties are reassessed every couple of years. Some areas with rapidly rising values have been quite aggressive in many new assessments, precisely because they know it will mean more revenue.
August 6, 2007 7:21 PM | Reply | Permalink
Economists get paid lots of money to pay attention to reality. If you ignore an $8 trillion housing bubble (read the cited papers), then you aren't doing your job. i think I have been extremely polite to these economists under the circumstances. I suspect that the people who take a bath will be less so.
August 6, 2007 7:26 PM | Reply | Permalink
btw, some fun numbers -- the inventory of unsold new homes is 70 percent higher than its previous peak in 1989. The number of vacant ownership units is nearly 100 percent higher than its peak in that year. The increase in first time homebuyers (a homeowner who sells a home to buy a new one does not reduce the inventory of unsold or vacant homes) over this period is about 7 percent.
August 6, 2007 8:53 PM | Reply | Permalink
But of course, "rapidly rising values" -- whether or not captured by reassessment or revaluation -- do not "mean more revenue" for the municipality.
As I said, revenue = assessed value multiplied by the tax rate. And the tax rate = the municipal budget divided by the total assessed value of taxable properties in the municipality.
The variable is the budget adopted by the governing body and not the assessed values of the taxable properties in the municipality.
August 6, 2007 9:25 PM | Reply | Permalink
The Washington Post was good enough to provide an example this morning of a government being hit by lower tax revenues due to declining real estate prices. Suburban Fairfax County (VA) is apparently looking at $120 million shortfall (2.0 percent of its budget) due to falling property values and rising foreclosures (people tend not to pay taxes when they are losing thier home).
August 7, 2007 3:15 AM | Reply | Permalink
I guess I was mixing it up with Tort Reform.
Still, peas from the same pod. Enable and empower corporations....and gut protection for avg joe.
Think Regionally. Act Regionally
August 7, 2007 6:05 AM | Reply | Permalink
Yes, too simplistic.
You forget that people have no other decent place to invest. There are no savings accounts that pay like they used to. Our 401ks get devalued at night while managers try to game the asian market with our money. Enron's and the like take a huge part of the economy with them when they go down. Oil prices and everything else skyrocket and avg. joe has in no part contributed to that. So, avg joe is to blame if you can show he is to blame for the disappearance of the savings industry. If you can show his blame for the corporate malfeasance that has rigged every market and every game. If you can blame Avg Joe for a capitalist society based on consuming our people.
Housing prices rise amazingly....not because the avg. joe is buying houses at the going rate. They cannot find affordable housing unless they move 1oo miles away from population centers...and you better hope there isn't a lake or scenic area nearby.
And you seem to be forgetting that banker's had to approve these loans. Now, were people acting illogically? Yes. Were they acting according to the prevailing conventional wisdom? yes. Did they have many choices? No. And....who profits when people default after paying hundreds of thousands in interest and almost zero on principle? My guess is the people collecting interest.
So, in short, when you ignore the obvious - namely that corporations and big money act immorally most of the time and with only gain and profit to justify their actions - then you are being too simplistic and taking the easy route to blame it all on 'stupid' people.
Stupid people are essential, yes, to great ripoff schemes. But you cannot remove the blame from the scheme's architects. Avg Joe didn't have lobbyists working 24/7 to pass legislation allowing predatory lending and school loan sharking. Avg Joe didn't dream up all the loan packages and ARM and ballon mortgages. He just bought them when offered.
Later: after reflecting on your post I see you did not give the architect's a free pass. And I agree with you wholeheartedly that people HAVE to live withing their means and learn simple lessons. I just believe, as adamantly, that our WHOLE system is a bunch of bad bargains and pipe dreams. I cannot blame avg joe as much as I blame the architects (and profiters)of this madness.
Think Regionally. Act Regionally
August 7, 2007 6:12 AM | Reply | Permalink
Re: You forget that people have no other decent place to invest.
Have the stock and bond markets closed their doors? Are there no mutual funds sold to the public? No, the "problem" is that there are no automatic "get rich quick" investments. Saving is something you do for a lifetime. You don't wake up on your 50th birthday and suddenly realize you need a bundle for retirement. Or if you do then you'd better adjust to the fact that you're going to be broke in your old age and that's due mainly to your own foolishness (OK, I'll be a little kinder and carve out a sympathy exemption for the truly poor and for people who have medical and other calamities hit them younger in life). The housing boom was largely motivated by plain old greed, by people who wanted to pocket a quick 100 grand in a couple years. It just don't work that way, never has and never will.
August 7, 2007 8:03 AM | Reply | Permalink
John Doe Pays for Excessive Financial Institution Risk Taking
Let's take banks that are charted by state or federal government. The mechanisms for regulating excessive risk in such banks are actually in place. When auditors review lending practices and see for example that a bank has a large portfolio of high risk loans (for example: no-equity mortgages) they require the bank to set aside more of its mandated equity/capital base to offset this risk.
If the mechanisms are not implemented by regulators on a timely basis the bank(s) slip below their required assets to equity ratio becoming to a degree insolvent.
When the pyramid scheming financial types go on a binge that entails red flag obvious 'excessive risk' taking, then massive losses occur, financial institution' equity hemorrhages and then ( Big Point) interest rates and margins on interest rates must increase until the financial institutions replace the lost capital.
John and Jane Doe have to pay a greed tax and pay more for their car loans, their mortgages, their credit cards until the banks replace the capital.
Meanwhile the financial types have stripped a tenth of a point here and a half a point there from these capital flows, enriching themselves until the speculative 'excessive risk' schemes meet their inevitable ( and I might add repetitive) denouement. In 2006, a good year for speculation and mortgages, Wall Street stripped 25 billion dollars from capital flows in bonuses alone.
In a bad year, when capital and equity shrink the little guy has to pony up to replace the capital. It's a mugs game and trust me, if the only way to get the money out the door to consumers in order that the 'bankers' can put a piece of the action in their pocket is to ratchet up the risk, "Brother" consider it done.
Ps I realize that not all the sub prime players are chartered banks. I simply use that as a simple example to explain the concept.
August 7, 2007 8:05 AM | Reply | Permalink
John Doe Pays for Excessive Financial Institution Risk Taking
Let's take banks that are charted by state or federal government. The mechanisms for regulating excessive risk in such banks are actually in place. When auditors review lending practices and see for example that a bank has a large portfolio of high risk loans (for example: no-equity mortgages) they require the bank to set aside more of its mandated equity/capital base to offset this risk.
If the mechanisms are not implemented by regulators on a timely basis the bank(s) slip below their required assets to equity ratio becoming to a degree insolvent.
When the pyramid scheming financial types go on a binge that entails red flag obvious 'excessive risk' taking, then massive losses occur, financial institution' equity hemorrhages and then ( Big Point) interest rates and margins on interest rates must increase until the financial institutions replace the lost capital.
John and Jane Doe have to pay a greed tax and pay more for their car loans, their mortgages, their credit cards until the banks replace the capital.
Meanwhile the financial types have stripped a tenth of a point here and a half a point there from these capital flows, enriching themselves until the speculative 'excessive risk' schemes meet their inevitable ( and I might add repetitive) denouement. In 2006, a good year for speculation and mortgages, Wall Street stripped 25 billion dollars from capital flows in bonuses alone.
In a bad year, when capital and equity shrink the little guy has to pony up to replace the capital. It's a mugs game and trust me, if the only way to get the money out the door to consumers in order that the 'bankers' can put a piece of the action in their pocket is to ratchet up the risk, "Brother" consider it done.
Ps I realize that not all the sub prime players are chartered banks. I simply use that as a simple example to explain the concept.
August 7, 2007 8:16 AM | Reply | Permalink
You make some really good points here; the average person has lost a lot of security in terms of jobs and work-based savings vehicles (pension vs. 401k/IRA). You're also correct that executives are often protected from comparable exposure. And that businesses seek out vulnerable people for nasty lending practices (e.g., offering negative-amortization loans to the elderly). But let me take them a bit further to make what I think is the deeper lesson of our times financially:
Much of the safety net that operated in the past has been removed. The average person is now obligated to take a much more active role in caring for her financial future than ever before. The individuals who have been caught up in the downside of the housing mess failed to be as diligent as they must be in protecting their own interests. I understand the appeal and temptation of making money quickly - I've made poor investments, and my wife and I almost purchased a condo a few years ago that would have strained our finances to the utmost because of the rapid increase in real estate values in our area. We chose not to do it, because we realized that to do so would have had us living on the edge each and every month and that if anything turned down for us or the market, we would have been in trouble.
Via the internet, almost everyone has at his disposal a wealth of information about most of the things needed to save money carefully and to protect his interests. Without too much work, one can find information about long-term real estate trends; this information would have been quite useful in determining that the housing boom of the past several years was unsustainable. I fully agree that there are plenty of traps out there, and plenty of companies willing to make a quick buck on the backs of average people. But I will also argue that it is critical that people realize that they must take action to become informed financial consumers and learn what they need to do to protect themselves; until times drastically change, ain't no one else gonna do it.
August 7, 2007 9:09 AM | Reply | Permalink
Hmm. Unpaid real estate taxes are a first lien on real property. That means they'll be paid, eventually. When municipal receipts fall due to unpaid taxes the municipality has a number of remedies -- general obligation borrowing, borrowing secured by tax titles, sales of tax titles, etc.
Now, it is true that Virginians have often proved themselves to be less than the sharpest knives in the drawer, but even they (the Washington Post, not so much) should be able to figure it out.
August 7, 2007 10:40 AM | Reply | Permalink
You seem to think that stocks and bonds and mutual funds are fine investments that aren't being skimmed and manipulated to the hilt.
Well, they are. Every market you can name has been tampered with. They all have had their gatekeepers caught with their hands in the cookie jar.
You know when 401ks and IRAs and such became the law of the land? Well, the wolves lined up and licked their chops. Any idea what that pool of money looks like, roughly 6% of the income of every man and woman with a fulltime job? Well that is a HUGE pile, and the wolves licked their chops at what they could do with that pile when no-one was looking. And they did it too. They have got caught redhanded....what else have they done that we don't know about? Plenty.
And they are angling still....to try to get your Social Security to be put in a privatized PILE that THEY get to SafeGuard. Do you trust them?
The SEC was a corrupt institution....where rich folks got assigned jobs as gatekeepers and immediately dropped all the defenses and let the wolves in. These are already rich people manipulating a market to amass more wealth off the backs of the relatively poor investors.
The SEC let all the wolves in. When Enron, HealthSouth, ComCast and all the others imploded, Booozeshy put in a SEC chief that appeared more of a law and order type. He started cracking down...then all the REAL POWERS started complaining. So Booozeshy went ahead and replaced HIM with a real corporate friendly SEC chief and we are right back on FastTrack for destruction.
It is one thing to be un-smart about investments and savings. It is also ONE thing to be a greedy individual.
The difference is when it is an Institution. Or tremendously powerful, influential, and rich organizations manipulate the WHOLE market. Stupid people can only manipulate (badly or unwisely) THEIR transaction. They do not have lobbyists rigging the whole game in their favor, to the detriment of all others.
When are ReichWing types going to drop the tired Hype of 'Personal Responsibility'? It is laughable in the face of institutional fraud and rigged markets that steal from every one of us.
Your disgust at the avg american is a cruel cheapshot. Just because there is a modicum of truth, you rest your whole argument on that and give the institutional wolves a free pass. Nice.
Think Regionally. Act Regionally
August 7, 2007 11:44 AM | Reply | Permalink
Re: Much of the safety net that operated in the past has been removed.
There never was much of safety net in the US, which is why our current debate over universal healthcare must seem like a debnate over the advantages of indoor plumbing to much of the rest of the world.
Re: Well, they are. Every market you can name has been tampered with.
Maybe, but that's always been true. And people have always lost as well as made money in the stock market (see Crash of 29, Panic of 1873, etc.)
Re: Your disgust at the avg american is a cruel cheapshot.
Please get off the soapbox. You have created strawman to box with. I am not a "reichwinger" nor do I feel any disgust at the average American (although I admit I did for a while back in November of 2004). I will say though that I am a bit non-plussed by the weird pseudo-nostalgia for the past by some posters here. There never was a "golden age" in America. The rich always did get richer, and the middle class (to say nothing of the poor) always did have to struggle to survive. Savings accounts paid no better interest in the past, the stock market was no more secure, than now, and there never was an easy way for the averge working person to make a quick fortune (which is what the housing speculators, who include some relatives of mine, were trying to do). Rather than fretting about some mythical lost past, something I tend to associate with the Religious Right's fanatsies about a onetime America of Christian virtue, the progressive attitude should be looking to build a better future.
August 7, 2007 5:16 PM | Reply | Permalink
If you don't want to be labelled as a Reichwinger, you may want to avoid mouthing their talking points.
Again you lay all the blame at the feet of a little guy with dreams of money instead of the SuperClass insiders who, generation after generation, swindle the piles of money accumulated by avg joes. That's Reichwinger Talk.
The prols clean up the mess and pay the longterm costs of the larceny...rinse and repeat...era after era. These Insider Suits make REAL profits, HUGE fortunes using the most amoral, vicious, and illegal means and you hang your hat on avg joe's WISH to get rich. Avg Joe's Pipe Dream up against works-every-time Corporate villainy.
I can prove to you that greed is a function of wealth. The more you have, the more you want, then you use your wealth as power to squelch others and protect your geometrically expanding pile.
And nearly EVERY avg joe who manages to leap the gap (from Plain Surviving to Rolling In It) follows the same path.
Global Corporations are a relatively NEW beast. Not much in common with past Conquerors, Republics, Empires, Despots. There is nothing Jaded or Old Hat or Business as Usual. The amount of control and grip and reach is an unprecedented phenomenon.
What a fairy-tale. A country as thoroughly OWNED and savaged by predation as ours - that shrilly protests and pretends that it is free and fair and merit-based.
The Insiders use their position, power, lobbyists, and lawmakers to write the whole deal their way. Power buying more power. They aren't gambling.
When I said all markets have beein corrupted and manipulated and you said 'so, it's always been going on' - What kind of argument is that? And you said people make money and lose money in the stock market....OK?
I have no particular love of the great unwashed. And I have a pretty low opinion of their 'use of brainpower'. And I would have to be included in their numbers. I will side with US everytime over the inbred super-predators, The New Borg.
August 7, 2007 8:21 PM | Reply | Permalink
Re: If you don't want to be labelled as a Reichwinger, you may want to avoid mouthing their talking points.
Where did I do this? You are inmagining words I never wrote, creating a phatomn foe.
Re: Again you lay all the blame at the feet of a little guy with dreams of money
And where did I do that? Are you reading some other person's post?
Re: I can prove to you that greed is a function of wealth.
Greed is a function of human nature. You can find it among the poor too.
Re: Global Corporations are a relatively NEW beast.
If you mean "new" within the last 200 years, yes. (See: the British East India company for an early example of a global coporation that drove the foreign policy of one of the world's most powerful nations)
August 8, 2007 3:33 AM | Reply | Permalink