OT: Where did the money go??

In the UK I think that it was the removal of "proper" bank managers and their replacement with "financial advisers" who look as though they have only just left school. 20 or 30 years ago my bank manager had full control of his branch; it was the bank manager who decided who was worthy of a loan, advised customers on appropriate investments and wrote warning letters to anyone who looked like running into debt. When I wanted to open my first bank account in 1968 I had to produce references from two people of "good standing" before the bank would even consider opening an account, even then I had to wait until my first month's pay went into the bank before they gave me a cheque book. Nowadays my postbox is full of letters from credit card companies, banks and building societies offering me huge loans (at a very high rate of interest).

Well, about 14 years ago the Dow hit 10,000 and NASDAQ hit 4,500 and people were nice and fat with money. They decided to loan money to millions of unqualified borrowers regardless their credit score for houses way too large for them to keep, and now you have a lot of foreclosures with no money going back to the lenders.

I know of at least two people who are not paying their mortgage and have thrown up their hands saying, let the bank have it. Of course the banks don't want the houses back, but anyone with any coin should buy up a few houses on the cheap and rent them out. Outside of REAL estate, paper money doesn't exist. It's all shuffled hither and yon. If Mark had a job, we would have bought a few houses on this block which will indeed be having a HUD notification on the door any day now. Perfectly beautiful homes with people who had too many kids, too much credit card debt and three car loans. Banks used to loan money based on income. I guess history will eventually repeat itself and we'll see stabilization in the financial sector, but don't hold your breath. Obama is not a miracle worker and people are more interested in the choice he makes when they get a dog. "Merkins. An odd lot. Victoria

I'm no financial wizard but it seems that it is all "paper" money. That is, it was only on paper and electronic ledgers as stock and home values, not in tangible, holdable bills. If I own 10 stocks someone is willing to buy for $100 today but will only pay $50 for tomorrow, I have "lost" $500 but only in the air, not in actual usable currency. So a bank that gave usable currency to a home seller, closing company, etc., and loaned out $80,000 real spendable currency on a $100,000 home was in effect betting that the home would retain its value. When it didn't, the bank can no longer recover all its $80,000 so it says it "lost" the money which was only paper profit in the first place since it depended on the value of the home remaining stable or rising. Makes it sound like the Emperor's New Clothes.

Pat > Thousands of lending institutions *all the over the world* are reporting

Seems like good advice, but anyone doing this should be sure they can carry what they buy without renting it, because the rental market isn't so great either. We just signed a lease on an apartment that was ready to rent September 1 and that's after dropping the price twice. Luckily, it was only costing us $100 a month to carry it, but we could have been in real trouble if one of the other units had come open during that time (we have 4 units total. Live in one, rent 3).

Elizabeth

I can't resist posting this explanation of the subprime meltdown:

bungadora wrote: > I can't resist posting this explanation of the subprime meltdown:

Too, too precious! Thanks for the Thanksgiving laugh! Dianne

Yes, of course. But this is the problem with the lending industry. They loan out fake money, then sell that loan to someone who will pay for it, to sell it to someone else and someone else. It's like buying a huge tree and passing it around and around till there is a toothpic. Then, because of the continuum, there can be no trace back to the origin and it becomes a void.

I think where we live is somewhat more unique in that housing is less expensive and utilities are not as much as up north.

Our realtor just sent me this listing because I've been trying to entice my mom to come down here so I can take care of her. Take a look at what 350,000 buys. In New York this house wouldn't be a dollar less than 750,000. Stay with it and look at it full screen.

And how is landlord life? The only positive thing I can say about the current is that she pays on time.

I rented for years and want to know? What else is a tenant responsible for, except maybe taking out the garbage? lol

Exactly; although it is a little different when the tenant lives in the same building. I wish ours had somehow learned to turn a doorknob. I always know when they're coming or going. When I spoke to her, she said her hands are usually too full and she hasn't bothered to try to change her behavior. And the dog is a pain in the ass, but now I know not to allow pets in the future. Breaks my heart, actually, but what am I going to do?

The new ones next door seem fine. They've rented as of 12/1, but we said they could go ahead and move in and they're very happily nesting. The couple who were already living there are fantastic, so here's looking forward to several years of unmolested rent collections, LOL!

Elizabeth

Exactly; although it is a little different when the tenant lives in the same building. I wish ours had somehow learned to turn a doorknob. I always know when they're coming or going. When I spoke to her, she said her hands are usually too full and she hasn't bothered to try to change her behavior. And the dog is a pain in the ass, but now I know not to allow pets in the future. Breaks my heart, actually, but what am I going to do?

The new ones next door seem fine. They've rented as of 12/1, but we said they could go ahead and move in and they're very happily nesting. The couple who were already living there are fantastic, so here's looking forward to several years of unmolested rent collections, LOL!

Elizabeth

Exactly; although it is a little different when the tenant lives in the same building. I wish ours had somehow learned to turn a doorknob. I always know when they're coming or going. When I spoke to her, she said her hands are usually too full and she hasn't bothered to try to change her behavior. And the dog is a pain in the ass, but now I know not to allow pets in the future. Breaks my heart, actually, but what am I going to do?

The new ones next door seem fine. They've rented as of 12/1, but we said they could go ahead and move in and they're very happily nesting. The couple who were already living there are fantastic, so here's looking forward to several years of unmolested rent collections, LOL!

Elizabeth

I did live in the same two family house as my landlord, but you won't be surprised to hear that we were the perfect tenants. lol

Besides paying the rent on time and knowing how to turn a doorknob, my husband was the go to guy for handyman jobs and not only did any necessary work in my apartment (although I did make the landlord pay if it was an expensive job) but he even went upstairs and did things for them. The husband in that household was an old fashioned jerk who wouldn't pick up a hammer unless he was trying to open a box.

As far as my little dog was concerned, my landlady was a holocaust survivor and afraid of any stranger that came to her door so when the dog barked and prewarned her, she was delighted. I used to tell him to shush and she asked me not to.

Lucille

My son and DIL lived below us in the old house we owned. Door slamming nearly drove me to distraction. When I took it up with her, she just looked blank. She truthfully didn't realize she did it. I was really glad when they moved, I think I would have killed her if I had to listen to it much more !

Well, long story short, I have reason to believe she's breaking the no smoking rule in the unit and when the maintenance crew had to go in for a plumbing issue (that unit houses the building septic connection) it looked like there had been a frat party there and the place reeked of spilled beer. (crew chief flagged me down - old buddy of ours)

Czar is a Siberian Husky, aka the world's worst watchdog. He doesn't bark when people arrive. He howls because he is lonely. That's not his fault, it's theirs. They really don't have time for a dog. I had told her that years ago and I should have stuck to my guns.

He also digs when it rains and has gotten into my garden on more than one occasion.

Elizabeth

Czar is a Siberian Husky, aka the world's worst watchdog. He doesn't bark when people arrive. He howls because he is lonely. That's not his fault, it's theirs. They really don't have time for a dog. I had told her that years ago and I should have stuck to my guns.

He also digs when it rains and has gotten into my garden on more than one occasion.

Elizabeth

Beautiful animal. Too bad he's not being properly cared for. They need lots of love and lots of running room.

Brattie, dear

Do you think Czar could be a Pal for your two? Would Cash and Harry teach him manners? Maybe he could be taught by example. Just a thought, still Max is as thick as a post, and Gretel on the ball all the time!

Gill

Poor puppy - better not let my DD know or she'll want to bring him home.

IIRC it wasn't the sub-primes that started the whole mess, it was the Sterns hedge funds that went into default and the rest started to fall like dominos. The zeros/ones computer hedge fund = Company (A) lends company (B) $10B interest being $3M, Company (B) lends company (C) $10B interest being $3M, Company (C) lends company (D) $10B interest being $3M, Company (D) lends company (A) $10B interest being $3M, say this is repeated three times the result is; company (B) owes company (A) $30B plus $9M interest, company (C) owes company (B) $30B plus $9M interest, company (D) owes company (C) $30B plus $9M interest, company (C) owes company (B) $30B plus $9M interest, Each company could advertise that it had $30B in assets (their loans to other companies within the group) and sucker the public into investing hard cash which it used for operating expenses. Each company uses the "off the record" accounting practise and doesn't show the $30B they owe to each other. say company (C) runs into trouble; company (C) tries to get half it's money back from company (D) company (D) says it has an agreement and just has to make regular payments, company (C) is now technically in default, word gets out and company (C) can't raise any money in the market, company (C) informs company (B) that company (C) can't make it's payment and is going ito officially default, now company (B) is in trouble because without money from company (C) company (B) can not make it's payment to company (A), round, round we go till the whole lot is in default. All four report that they each lost $30B+$9M in interest for a total of $120B when in actual fact it was only company (A) that lost $10B in principal plus $9M in interest that it hoped to gain. The original $10B just kept going around in cyber circles.

The simplest solution to the sub-prime problem would have been to just rewrite the mortgages at the original rate.

How many of the fat cats (my apologies to cats) are going to go to jail?? All depends on if the pilots of their corporate jets can fly them there.

Fred