The mood was bleak on Wall Street at the closing bell yesterday, with stocks looking at the seventh-biggest drop in history, falling 514 points. A litany of data showed that neither Wall Street, nor the global economy, was anywhere in the vicinity of the road to recovery.
In addition to extremely poor 3rd quarter earning results, Realty Trac reported that over 81,000 home were foreclosed upon in September. This is a 71% increases from the same time period just a year ago.
“I wouldn’t be surprised to see foreclosures increase as the economy slows down,” said Rick Sharga, Realty Trac’s VP of marketing. “The people living paycheck to paycheck are at risk if they lose their jobs. It will cause more people to lose their homes.”
It could be argued that perhaps these homeowners should have thought about that minor detail before they took on mortgages they couldn’t truly afford, but we digress…
Shelia Blair, chairwoman of the FDIC is working on a plan to help the struggling homeowners.
“Loan guarantees could be used as an incentive for services to modify loans,” Blair said, “Specifically the government could establish standards for loan modifications and provide guarantees for loans meeting those standards.”
The outcome of which being, Blair continued, “unaffordable loans could be converted into loans that are sustainable over the long term.”
This news should make the protesters that we at the Mortgage Bankers Association annual convention this week happy. MarketWatch reports that several members of the political protest group Code Pink showed up at the convention and the groups co-found Medea Benjamin “walked on stage during a panel discussion on Fannie Mae and Freddie Mac and demanded a moratorium on foreclosures. Meanwhile, outside the Moscone West Convention Center in San Francisco, another group of people picketed as convention attendees entered on Monday morning.”
Code Pink and the Party for Socialism and Liberation were in full effect at the convention, with their main issue being the over $700 billion bailout. The battle cry was “Jail them, don’t bail them.” Catchy.
“The main point, and the main issue for everyone, is there should be a stop to foreclosures and evictions and the government should be assisting the victims of the crisis and not the people who created it,” said Richard Becker, spokesman for the Party for Socialism and Liberation.
But why are they protesting at the MBA conference? “The relationship between the mortgage bankers and Wall Street is just connecting a couple of dots,” Benjamin said. “When the housing bubble became a more general economic crisis, the ways to deal with it were coming from Wall Street and the bankers, and not coming from the point of view of who were the victims of this, people who had been pushed into loans they should never have gotten,” Benjamin said.
Now, we agree that $700 billion is a steep price tag to help out Wall Streets ‘masters of the universe’ – but there is something to be said about accountability at all levels of this crisis. We can’t help but wonder how these homeowners did not see this coming. If you live paycheck to paycheck, how did you think you could afford a mortgage payment?
We are astounded by the overwhelming naivete of the American people, who believed that interest rates would always stay low and that they could used their home as an ATM indefinitely.
But, as our fearless leader often points out, “People believe what they need to believe when they need to believe it.”
*** The Labor Department reported yesterday that there were more “mass layoffs” (where 50 or more employees are let go at one time) than in any month since September 2001.
From The Washington Post :
“Companies that announced plans this week to cut jobs include Internet company Yahoo (1,500 positions), pharmaceutical company Merck (7,200), National City bank (4,000) and Comcast, the cable company (300).”
Looks like we can forgo the retail boost we usually see in the next couple of months because of holiday spending. Santa’s bag is sure to be a little lighter than usual this year…
*** Our friend Chuck Butler highlighted an interesting quote from Founding Father Thomas Jefferson in today’s issue of The Daily Pfennig:
“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution…Bankers are more dangerous than standing armies…(and) if the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their property until their children will wake up homeless on the continent their Fathers conquered.”
We thought this quote was quite apropos, especially considering that one of the ‘Founding Fathers of the credit crisis’ testified today in Washington. That’s right, Big Al was on the Hill today, and said that we in the midst of a ‘credit tsunami’.