the Big Business of Economic Suffering

Let us say a magic wand could be waived and there was no more bankruptcies, car repossessions or home foreclosures..  All debt in arrears were instantly and magically paid.

Question:  How (if at all) would economy be affected?

-  To start there'd be no need for bankruptcy attorneys and the thousands of dollars in fees they receive to represent you in bankruptcy court, or to take a portion of your monthly payments if you filed a Chapter 13 (repayment of a portion of your debts)  vs Chapter 7 (all debts wiped off books).  And so much money to be made if the debtor appeals the judge's findings..

So all those attorneys with their hundreds of thousands of dollars in student loans are out of work unless they go into different fields.  (And could you imagine those poor, poor bloodsuckers' fate if there was no crime, car accidents or divorces?)

And remember, bankruptcy attorneys advertise heavily on local TV stations and newspapers, so that ad revenue is gone--  'Poof!'

-  No need for bankruptcy judges either, so they'd have to find another area of law to express their intimidation of others.  In fact, the entire court system would lose out on all the money brought in annually from filing fees, sheriff's notices of services to your doorstep, etc Also, less bailiffs, sternographers, etc..

-  The post office would lose even more revenue than it does now.  Here's some fun math:  The average debtor receives at minimum 6 pieces of mail per month from creditors, legal offices, collection agencies, etc issuing warnings or threats.  Stamps cost 45 cents each so x 6 = $2.70/mo x 12 months = $32.40.

In 2011, over 1.5 million people filed for bankruptcy, so let's use that figure to demonstrate the number of Americans still waiting to file this year: 1.5 million people x $32.40 = $48.6 million.  That's how much, generally speaking, the US Post office generates in income annually Solely based on snail mail notices and warning letters to debtors.

-  Of course no need for collection agencies if nothing to collect so there goes thousands upon thousands of low paying, low skilled jobs held by mostly high school graduates with tough voices and tougher attitudes.

-  The repo industry takes a financial hit as well.. everyone from the people who literally take possession of  the debtor's car, HDTV, etc.. to the people who sell it to others at auction.

-  Then there's the good' ole credit companies and banks themselves..  How can they possibly offer people cards with 25-30% APR if everyone's credit score is in good shape and not damaged for 7-10 years from a bankruptcy?  How could a credit card like Orchard Bank get away with offering credit cards to those with bad credit for annual fees of $100-200 if no one with bad credit is to be found?  So many of those entry and mid-level jobs at banks and credit companies would have to be eliminated because no one to gouge.. tsk tsk..

So you see, bankruptcy is really good business.   It stimulates the US economy, which is why no one in a position of power wishes to do the slightest thing to make repayment of debts and avoidance of filing bankruptcy easier for those whose lives are being systematically destroyed.

To the government, you are not a person but  a statistic.  And you serve three functions:  Pay taxes, obey the law, and consume.   If you run out of money, use credit.  When that runs out, the mechanisms are in place to financially profit from your downfall.  And once you survive bankruptcy, mechanisms are in place to profit as you try rebuilding your life.   Once you succeed at restoring your credit and beginning your new life... well...  Happy Consuming!

Bank Or REIT..... :-)

I know that the headline is a little bit overstreched but i couldn´t resist.....When you now add Quelle Surprise! Banks Taking Big Losses on Real Estate Disposals via Naked Capitalism ( watch the chart! ) you know that the bottom for banking stocks and housing is nowhere near. .... Unless you are "Easy Al" Greenspan Calls a Housing Bottom (Again) Thanks Mark :-)!

Bin mir sehr wohl bewußt das die Überschrift natürlich übetrieben its. Da der Trend aber aif Sicht anhalten wird würde es mich nicht weiter wundern wenn die größten US Banken demnächst unter den größten Immobilienbesitzern auftauchen werden ( wenn auch ungewollt....) Wenn man jetzt noch dieses Posting von Naked Capitalism Quelle Surprise! Banks Taking Big Losses on Real Estate Disposals in die Betrachtung miteinbezieht ( bitte den Chart beachten ) ist es offensichtlich das der Boden der ja jetzt zum gefühlten zwanzigsten Male von sog. "Experten" ( hier ein extrem tarurigens und schauriges Beispiel Greenspan Calls a Housing Bottom (Again) ) ausgerufen worden ist für US Finanzwerte und den Immobilienmarkt noch lange nicht erreicht ist.

U.S. Foreclosures Increase 55%, Bank Seizures Rise to Record Bloomberg
Bank repossessions almost tripled in July and U.S. foreclosure filings increased 55 percent from a year earlier as falling prices cut homeowner equity, accelerating the housing decline, RealtyTrac Inc. said. ....

Bank seizures rose 184 percent, the most since reporting began in January 2005, the Irvine, California-based seller of foreclosure data said today in a statement

Bank seizures, known as real estate-owned or REO properties, are the ``fastest growing segment of foreclosure activity,'' James Saccacio, chief executive officer of RealtyTrac, said in the statement. The REO properties in the company's database represent about 17 percent of the inventory of existing homes reported in June by the National Association of Realtors, he said.

via FT Alphaville

RealtyTrac now has more than three quarters of a million properties in its active REO database, a number that represents approximately 17 percent of the inventory of existing homes for sale reported in June by the National Association of Realtors.

About 1 in 11 Mortgageholders Face Loan Problems

"Contained" :-) ...... No wonder the market was up yesterday......

Kein Wunder das der Markt gestern so freundlich war....... Jeder der denkt das die Krise im US Finanzsektor überstanden ist sollte sich die nachfolgende Grafik sehr genau ansehen. Finanztitel sollte man nach wie vor nicht mal mit der Kneifzange anfassen.

About 1 in 11 Mortgageholders Face Loan Problems NYT


grösser/bigger

Housing Meltdown / Business Week Cover Story

You gotta give them credit for being one of the first major media outlets that had predicted some kind of trouble brewing in the housing market. Here are some examples of their earlier track record. If you don´t want to digg through the entire 5 page long lead story i suggest to skip through the slide shows ( see one example below ). I think that most of the stuff isn´t really news to reader of this blog but it is at least a good and short summary.

Man muß Business Week mal ausdrücklich ein dickes Lob aussprechen. Sie waren einer der ersten bedeutenden großen Medieninstitutionen die zeitig auf das kommende Unheil hingewiesen haben. Zum Beweis kann man hier einige Beispiele einsehen. Wenn Ihr keine Muße habt Euch durch den langen Leitartikel zu kämpfen empfehle ich alternativ sich durch die Slideshows zu klicken. Exemplarisch habe ich weiter unten ein Beispiel herausgepickt. Obwohl das Meiste dürfte den Lesern des Blogs nicht wirklich neu erscheinen so ergeben sich doch eine schöne Zusammenfassung und wagen einen wie ich finde einigermaßen realistischen Ausblick.

Housing Meltdown / Why home prices could drop 25% more on average before the market finally hits bottom Full Business Week Cover Story

Analyzing the Housing Crisis Slide Show

The 25% Dissolution Slide Show

Housing Prices Shed Gains Slide Show

Coast To Coast
A 20% decline in home prices would wipe out all of the home equity of two-thirds of all people who bought houses in the last year, Zillow.com estimates. The bars show the percentage of recent buyers in each market whose home equity would be wiped out by a further 20% price decline.

60 Minutes Legitimizes Walking Away

I have borrowed the headline 60 Minutes Legitimizes Walking Away from Mish. He has also some more thoughts on this topic ( read also The Business of Walking Away ) . Also a hat tip to my friends from Housing Doom for digging the Youtube version. I hope this clip shows especially the European visitors how bleak the reality looks like and why we are still in the beginning of this painful process of the "correction". Lots of Germans ( including Landesbanker like West LB , Sachsen LB, IKB etc.) can´t understand that it is possible to just "walk away" from the house without facing consequences for the rest of their lifetime like here in Germany.

Dank geht an Mish für die "geborgte" Überschrift die eine ganz neue Dynamik in den "Anpassungsprozeß" der US Immobilienkrise bringen wird . Hier weitere Gedanken von Mish The Business of Walking Away . Zudem dank an Housing Doom für das aufstöbern der Youtube Version.

Nur zur Erläuterung muß erklärt werden das anders als in Deutschland die Haftungen in großen Teilen der USA und insbesondere in den Hochburgen wie Kalifornien bei einer Zwangsvollstreckung komplett anders als zum Beispiel in Deutschland gestaltet sind. Dort wird nur mit der Immobilie gehaftet. Das ist gleichbedeutend damit das selbst wenn die Immobile unter den Hammer kommt und die Bank wie momentan üblich gigantische Verluste macht der Schuldner nicht für diesen Verlust einzustehen hat.

Praktisch, oder?

Würde mal tippen, das auch dieses Neuland für die Manager der Landesbanken ist ( siehe Sachsen LB, West LB , IKB usw ) Sinnvollerweise haben die Verantwortlichen oftmals gleich die ganze Bank aufs Spiel gesetzt um auch ja genug US Hypothekenpapiere zu erwerben.....

So kommt es vor das zum Beispiel wenn ein Haus auf der gegenüberliegenden Straßenseite für 300.000 $ zum Verkauf steht und man für sein eigenes Objekt mit 400.000 $ in der Kreide steht ( Eigenkapital war ja zum Glück dank der wahnwitzigen Finanzierungen in den letzten Jahren aus der Mode gekommen ) es nur logisch ist das neue Objekt zu erwerben und das andere in die Zwangsvollstreckung gehen zu lassen. Der damit ruinierte Creditscore sollte bei dieser Ersparniss nicht weiter ins Gewicht fallen. Noch besser wird es wenn man es sogar geschafft hat während Zeiten steigender Immopreise die Refinanzierungskeule zu schwingen und siene Immobilien mit immer neuen Hypotheken zu belasten. Welch gigantische Ausmaße das ganze in der Verganheit angenommen hat zeigt eindrucksvoll dieser Chart.

Schweizer Ansichten von meinen geschätzen Bloggerkollegen gibt es auf Zeitenwende

Deutsche Bank Buybacks & Foreclosures

I just couldn´t resist. Every time we hear the phrase "buyback" the stock jumps. It doesn´t matter if these buybacks will occur or not. I have been stumbling on a review of what the buybacks have done for the shareholders of Deutsche Bank. Taking todays share price they buybacks have resulted in a loss of over $ 350 mio. So far....... I assume that their focus now that the shares are trading around 85 and 30 percent of the peak is to preserve their core capital ...... Nice timing!

Da konnte ich einfach nicht wiederstehen. Jedesmal wenn der Begriff "Aktienrückkauf" in den Mund genimmen wird steigen in der Regel die Aktien. Und das unanhängig davon ob diese Käufe auch jemals durchgeführt werden. Ich bin in den letzten Tagen auf diese Betrachtung der Rückkäufe durch die Deutsche Bank gestolpert. Und basierend auf dem aktuellen Preis sieht es ganz so aus als wenn hier mal eben 250 Mio € " nicht optimal and die Aktionäre zurückgegeben worden sind. Bisher....... Und ich kann mir sehr gut vorstellen das da der Aktienkurs knappe 20% vom Durchschnittskurs und ca. 30 % from Hoch zurückgekommen ist der Focus jetzt eher auf die Stärkung des Kernkapitals liegt...... Tolles Timing!

And when looking at the following graphs and other charts from their analyst presentation i think they already regret some of the buybacks .....

Und wenn man sich die nachfolgenden Grafiken und die Chart der Analystenpräsentationansieht bin ich mir ziemlich sicher das Sie einige der Aktienrückkäufe schon bereuen....

Foreclosure wave sweeps America / BBC
Cleveland, Ohio, is an industrial city on the banks of Lake Erie in the US "rust belt".

It is the sub-prime capital of the United States. One in ten homes in the city is now vacant, and whole neighbourhoods have been blighted by foreclosed, vandalized and boarded-up homes.

THE SUB-PRIME CRISIS IN CLEVELAND / Interactive Map

Many of these homes are now owned by the banks and investment pools owning the mortgages, and the company making the most foreclosures in Cleveland is Deutsche Bank Trust, which acts on behalf of such investment

Next comes a raher grim view from Citi via the FT

Nachfolgend ein recht kritischer Bericht von der Citigroup via der FT

Beware the “uber leveraged” trio — Barclays, RBS and Deutsche

Research by Citi’s Simon Samuels suggests that, depending on the measure used, Europe’s banks need to fix capital deficits that run as high as 20 per cent - on average!

Most strikingly, however, are Europe’s “uber leveraged” trio — Barclays, RBS and Deutsche Bank — where capital deficits range from 60% to 80% of market cap.

To put this graph into perspective you have to click here .... The graph above shows the enlarged version of the right scale....

Um diese Grafik ins Verhältnis zu setzen ist ein Blick auf diesen Chart empfehlenswert....Mein vergrößerter Ausschnitt zeigt den rechten Teil der Skala.....

Foreclosure Filings Soar in 3rd Quarter

The cartoon from Jim Borgman nails the situation..... No surprise that almost every "heatmap" looks the same....

Dieser Cartoon von Jim Borgman trifft den Nagel auf Kopf....... Es sollte auch nicht weiter verwundern das sich nahezu alle ""Heatmaps" zum verwechseln ähneln...

Foreclosure Filings Soar in 3rd Quarter
A total of 446,726 homes nationwide were targeted by some sort of foreclosure activity from July to September, up 100.1 percent from 223,233 properties in the year-ago period, according to Irvine-based RealtyTrac Inc.

The current figure was 33.9 percent higher than the 333,731 properties in foreclosure in the second quarter of this year.


Nevada reported one foreclosure filing for every 61 households, with 16,817 filings on 12,982 properties.

That marked a 22.8 percent increase in filings from the previous quarter and a tripling from the year-ago quarter.

California led the nation in total foreclosure filings and reported one filing for every 88 households.

The state had 148,147 filings on 94,772 properties, an increase in filings of 36 percent from the previous quarter and nearly four times more than the year-ago period.

In Florida, there were 86,465 foreclosure filings on 60,992 properties during the third quarter, RealtyTrac said. Foreclosure filings rose 51.5 percent from the previous quarter and more than doubled from the same quarter last year.Florida's foreclosure rate amounted to one filing for every 95 households, RealtyTrac said.Rounding out the top 10 states in foreclosure rates were Michigan, Ohio, Colorado, Arizona, Georgia, Indiana and Texas.

The United States of Subprime / WSJ

Brilliant! This is a must read and the interactive map "subprime tidal wave" is a must see!

Brilliant! Der komplette Artikel ist zu Recht auf Seite 1 vom WSJ. Die interaktive Karte "Subprime Tidal Wave" ist ein echter Hingucker und sollte auf keinen Fall verpaßt werden!

I suggest to read the entire link

Ich empfehle den kompletten Link zu lesen.

The United States of Subprime
As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.

The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.

High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash.

To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.

Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations.

The Journal's findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. From investors hoping to strike it rich by speculating on condominiums to the working poor chasing the homeownership dream, subprime loans burrowed into the heart of the American financial system -- and now are bringing deepening woe.

The data also show that some of the worst excesses of the subprime binge continued well into 2006, suggesting that the pain could last through next year and beyond, especially if housing prices remain sluggish. Some borrowers may not run into trouble for years. ....