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Patrick Killelea of Patrick.net talked at Google a couple weeks ago on the subject of his housing crash website, renting vs. buying, and a number of other topics.
Part two is here and the WSJ article from earlier this month referenced at the start of the video is here. Not surprisingly, Patrick still thinks it’s a terrible time to buy.
One look at yet one more story about how the world should assess and assign blame for the ongoing financial crisis, this one appearing over at the Wall Street Journal Real Time Economics Blog the other day titled No Resolution in Sight in Fed Blame Game, has belatedly brought me to the conclusion that, for years now, nearly everybody has been asking the wrong question about blame for the financial crisis.
Of course there was no one person or one group that was primarily responsible for the financial crisis - clearly it took many players to cause a mess as big as the one that we now have on our hands.
Yet, that’s the question that everyone seems to want answered in recent years.
Who caused it?
Which individuals, what organizations?
If ever there were a good example of a group effort, the housing and credit market bubbles and their inevitable demise were surely it and seeking to find the one group that was most responsible is really an exercise in futility because no one fits that bill.
Ultimately, it’s not a very productive exercise either, save for the astonishingly consistent repetition by the nation’s central bank that low interest rates were not to blame. That, by itself, speaks volumes about where we are in the process of understanding what has happened since 2008 and fixing it.
Maybe a better question to ask is, who could have prevented it or stopped it?
The NAR (National Association of Realtors) reported that sales of existing homes rose 6.8 percent in March as more buyers took advantage of the homebuyer tax credit, a government incentive program that expires next week.
Since the existing home sales data does not reflect contract signings but, rather, completed transactions and the upcoming expiration of the tax credit is for the former, not the latter, there should be three more months of relatively strong sales in April, May, and June.
This Wall Street Journal report takes a look at some of the individual mortgages that hedge fund manager John Paulson was betting against in the synthetic CDO that has landed investment bank Goldman Sachs in the cross hairs of the SEC.
The government’s civil-fraud allegation against Goldman Sachs Group Inc. centers on a deal the firm crafted so that hedge-fund king John Paulson could bet on a collapse in U.S. housing prices.
It was a dizzyingly complex transaction, involving 90 bonds and a 65-page deal sheet. But it all boiled down to whether people like Stella Onyeukwu, Gheorghe Bledea and Jack Booket could pay their mortgages.
They couldn’t, and Mr. Paulson made $1 billion as a result.
Mr. Booket, a 44-year-old heating and air-conditioning repairman, owed $300,000 on his three-bedroom home in Aberdeen Township. His house was one of thousands that wound up in a pool of mortgages that were referenced in the so-called collateralized debt obligation, or CDO, which Goldman created for Mr. Paulson. The hedge-fund manager invested heavily in a form of insurance that could yield huge gains if the borrowers grew unable to pay.
In 2006, Mr. Booket got hit by a car while riding a motorcycle from a late-night party, was unable to find much work and couldn’t pay the bank. In October 2008, he lost the house to foreclosure and plans to move out by next week. He says he bears no grudge against Mr. Paulson and Goldman.
“The man came up with a scheme to get rich, and he did it,” says Mr. Booket, who had refinanced his mortgage just months before the accident. “So more power to him.”
The whole thing is worth a look and it’s in the Journal’s public area. They actually examined the 90 bonds that were part of the Abacus deal (corresponding to 500,000 mortgages) and then matched the data with court records and other sources to identify the owners.
The National Association of Realtors will report on existing home sales in about a half hour. Until then, the latest on strategic defaults from PBS.
The transcript is here, where you’ll find the very simplest of logic by John Bartlett, “I can go across the street, pay cash, and never have to worry ever again about a mortgage payment.”
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By Tim Iacono, Since 2005
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