The "D" word

[ScottSA]

It's only talk, of course, and arguably motivated by political consideration, but he's not far off. In any event, don't buy Wells Fargo stock anytime soon.

SAN FRANCISCO — Evoking Depression-era memories, Wells Fargo & Co. President John Stumpf on Thursday became the latest banker to predict continuing difficulties in the U.S. housing market as risky mortgages made to overextended borrowers disintegrate into large loan losses.

Speaking at an investment conference in New York, Stumpf said the current real estate conditions are the worst he has experienced during his 30-year career. He then punctuated his gloomy assessment by harking back to the deepest downturn of the 20th century.

"We have not seen a nationwide decline in housing like this since the Great Depression," he said.

http://www.insidebayarea.com/business/ci_7480194

[GostHacked]

Part the banks fault, part the persons fault.

Person knows that they cannot afford it, bank tells them they can afford it. Bank knows all to well that they cannot.

The sad part here is the bank wins either way. They get their money back in interest on the loan, or they simply take the house back if payments are not made. Either way the bank walks away with something.

People like to live above their means. Trying to live the high life on a low wage. Many do not prepare enough in order to purchase a home. It is the single biggest investment of anyones life. Not something that can be just taken care of half assed.

Other factors like job loss, or a recent disability, ect ect can also be a factor, then there is the issue with insurance (have it?). You spend quite a bit on insurance to keep everything safe in case something happens.

I'd love to buy a house, but I know I will not be finnancialy ready for a couple more years. And when I buy a house, it is not going to be large and fancy. Buy a home you can afford, and then make it into the home you want. Planning is essential in homebuying.

[JerrySeinfeld]

Part the banks fault, part the persons fault.

Person knows that they cannot afford it, bank tells them they can afford it. Bank knows all to well that they cannot.

The sad part here is the bank wins either way. They get their money back in interest on the loan, or they simply take the house back if payments are not made. Either way the bank walks away with something.

People like to live above their means. Trying to live the high life on a low wage. Many do not prepare enough in order to purchase a home. It is the single biggest investment of anyones life. Not something that can be just taken care of half assed.

Other factors like job loss, or a recent disability, ect ect can also be a factor, then there is the issue with insurance (have it?). You spend quite a bit on insurance to keep everything safe in case something happens.

I'd love to buy a house, but I know I will not be finnancialy ready for a couple more years. And when I buy a house, it is not going to be large and fancy. Buy a home you can afford, and then make it into the home you want. Planning is essential in homebuying.

The bank doesn't "win either way". Banks are in the lending business, not the housing speculation business. To end up owning a house that has declined 30% in value since the mortgage was assigned is not a win anyway you look at it. That is why the banks have been taking the major write downs you've been hearing about.

I think this is one dimensional thinking to say it's "depression". The US economy is still growing and people are still working. Some of them just might end up renting now instead of owning 5,000 square foot homes and two brand new cars on $90,000 per year pre tax.

I think it's a healthy real estate correction - one we could probably use here in Canada. People who speculate on real estate thinking it "always goes up" need a good pummelling once in awhile. Realtors who advise people to leverage 20 times on an investment property should be subject to prosecution.

My two cents.

[GostHacked]

JerryS

The bank does not loose as much as the people the bank just foreclosed on it. The amount of lending and susequent housing market crash is 'lender' driven. The buyer looses the house and any money paid on it, the bank gains a house, but at a loss, but not a total loss like the buyer.

Some rents are higher than what a mortgage would cost. A close friend just bought a house recently, (1700 sqft) and his mortgage is under $1000/month (including taxes ect). I know of some small simple 3 bedroom apartments for $1200/month and up. Then you can factor in utilities.

Could it be a problem of the land developers making bigger houses? Knowingly that only a select few will be able to afford them? Also, those lenders may also help out the land developers, so again, the lender/bank seems to always always gain from any situation.

[JerrySeinfeld]

The bank does not loose as much as the people the bank just foreclosed on it. The amount of lending and susequent housing market crash is 'lender' driven. The buyer looses the house and any money paid on it, the bank gains a house, but at a loss, but not a total loss like the buyer.

Yes. And as I stated previously - this is a

loss

to the bank. The bank does not "win either way" as you had stated.

The reason the buyer loses is because he doesn't pay what he owes. That's his fault. The reason the bank loses is because it took a risk on a borrower who obviously ultimately couldn't pay his debts: that's their fault. The borrower loses and the bank loses. That's the business transaction here.

Some rents are higher than what a mortgage would cost. A close friend just bought a house recently, (1700 sqft) and his mortgage is under $1000/month (including taxes ect). I know of some small simple 3 bedroom apartments for $1200/month and up. Then you can factor in utilities.

That's not the bank's fault. That's what the market will bear.

Could it be a problem of the land developers making bigger houses? Knowingly that only a select few will be able to afford them? Also, those lenders may also help out the land developers, so again, the lender/bank seems to always always gain from any situation.

You are revealing a very limited knowledge of economics here. Land developers don't "make bigger houses". Land developers make what they can sell. They put together pojects which will sell to the public. What will sell to the public, you ask? Whatever they demand.

A land developer doesn't just go out and build neighborhoods full of big houses on the hope that they can sell them. They sell them first. Then they build them.

Please explain me how a bank that lends someone $500,000 to build a house, then forecloses and takes posession of a house now valued at $350,000 is gaining?

Meantime - why don't you look up the share price of Citigroup, which has lost 40% of it's value since the spring when this whole US subprime thing started to rear it's ugly head.

I'm sure the shareholders wouldn't share your view that the banks "win either way".

[jdobbin]

We've had a couple of threads that mentioned the danger the U.S. housing market poses overall for the economy.

We'll see how it begins to affect other areas of the market in the post U.S. Thanksgiving retail market.

[JerrySeinfeld]

We've had a couple of threads that mentioned the danger the U.S. housing market poses overall for the economy.

We'll see how it begins to affect other areas of the market in the post U.S. Thanksgiving retail market.

It's unknown how it will affect - but I am optimistic.

As long as people have jobs - which they do - I think the sub prime problem will be relatively contained to this one sector of the economy.

The US is already forecasting a slow Q4 1.5% GDP or so. But the fed cut the both fed funds and discount by 75 basis points already and I believe that liquidity will keep things going in the debt-driven US economy.

[Leafless]

The reason the buyer loses is because he doesn't pay what he owes.

How is that?

The buyer owns absolutely nothing until every red cent of the mortgage has been paid off.

That's his fault.

It is?

Then it sounds like somebody's getting shafted if you own 'nothing' initially, and it isn't the bank.

The reason the bank loses is because it took a risk on a borrower who obviously ultimately couldn't pay his debts: that's their fault. The borrower loses and the bank loses. "win either wayThat's the business transaction here.

The bank owns everything initially and did not take any risk.

All the risk is with the borrower who owns nothing and pays back a extremely healthy return to a institution that uses other peoples money to finance THEIR GREAT RISK!

This is not a business transaction, it is next to gangsterism.

Edited November 16, 2007 by Leafless

[M.Dancer]

Umm....not quite. The owner after a period starts amassing equity in the house, the difference between what was borrowed and what is owed including interest.

If a borrower find that they are going to miss payments, the smart thing is to sell as quickly as possible so that they don't lose equity.

[JerrySeinfeld]

If the buyer owns nothing, then who keeps the difference when he sells at a higher price than he bought?

Oh right: the buyer.

This is nothing more than an example of people buying property (ie. taknig on financial risk) using leverage, getting in over their heads, then crying foul when the prices go south.

People need to get bumfucked once in awhile to teach them about what risk is.

[Leafless]

If the buyer owns nothing, then who keeps the difference when he sells at a higher price than he bought?

Oh right: the buyer.

Generally speaking, after the buyer is finished paying all associated municipal & school taxes taxes, maintenance and home improvements and depending on market conditions, equity is simply getting your money back for the fruits of your labour and paying your taxes and sometimes this sum is negative.

Even in a time of rapid growth one might think in terms of great profit after selling their current home only to find out the new home they intend on buying cancels out this profit ratio and again the buyer is faced with another mortgage.

[GostHacked]

Jerry S

You are revealing a very limited knowledge of economics here. Land developers don't "make bigger houses". Land developers make what they can sell. They put together pojects which will sell to the public. What will sell to the public, you ask? Whatever they demand.

I live in Ottawa, and you should see the developement around here. Large condo complexes, large row housing, larger single units ... everything is bigger bigger bigger, resulting in a higher cost for the new homebuyer. It is also the market creating the WANT/NEED for bigger houses. When most of us do not need a large ass house, considering where you spend the most time in the house. The market sucks us into thinking we need to keep up with the Jones's to make us feel and look good. It is this market driven 'want/need' that is ruining things. People do not NEED large houses, they simply WANT large houses. For what purpose?

The land developer is also getting cash from investors in order to make money on building houses for people to buy. Lenders also help those out buying the house. The lenders/banks own it all untill that day you pay it all off. If you miss a payment for whatever reason, the bank can take the house back. And you are screwed.

Leafless

Generally speaking, after the buyer is finished paying all associated municipal & school taxes taxes, maintenance and home improvements and depending on market conditions, equity is simply getting your money back for the fruits of your labour and paying your taxes and sometimes this sum is negative.

This is a spot on point here my friends. My aunt and uncle have been renovating their house on a yearly basis for the last 15 years. Eveytime they invest money into the house, they are eventually going to loose money on the house due to all the renovations. They might get a higher price than when they originaly bought it, but with all the improvements, they are still going to have a large net loss of all the money invested into astheticaly improving their home. Now if you do not have enough cash for the project, the bank will simply loan you money at an interest rate, so in the end, you loose initially on interest on the project, and then loose money after the project is done (the total value will be less than the overall investment and the homeowner looses in the end anyways). And if you miss payments, the bank can take it all away, because you probably put the house up or something else as collateral. That is not including the yearly taxes that are imposed on a homeowner as Leafless has mentioned here.

The bank seems to always gain somehow. And when banks are recording record profits for the past few years, I fail to see how the banks could possibly loose here.

[Moxie]

Investment advisers have been warning the public that the housing Bubble in the US was going to burst, it's no surprise that it did. When I buy a home I always insure that I can pay the mortgage as interest rates rise, it's part and parcel to good financial planning. Sadly buying a house is rapidly becoming unattainable for middle income earners, those that bought during the boom must of known they couldn't afford their mortgage payments when interest rates started to rise.

I'm carefully watching the markets and my portfollio, I'm not heavly invested in the US, most of my money is in Latin America and third world countries. I am keeping my fingers crossed though.

[ScottSA]

I'm carefully watching the markets and my portfollio, I'm not heavly invested in the US, most of my money is in Latin America and third world countries. I am keeping my fingers crossed though.

Yer gonna be in trouble. This crisis is not going to be confined to the US, by any means; the US is at once the center of it and the economy best able to withstand it. Unless you're in pure oil stocks (and even that is iffy), the third world will fall much more profoundly than the US ever will. The ripples haven't even started yet.

That's why I can't understand this notion that China somehow holds the cards because it holds US debt and dollars. If China wants to commit economic suicide, the best way I can imagine is for it to attack the US by dumping greenbacks.

[Moxie]

Yer gonna be in trouble. This crisis is not going to be confined to the US, by any means; the US is at once the center of it and the economy best able to withstand it. Unless you're in pure oil stocks (and even that is iffy), the third world will fall much more profoundly than the US ever will. The ripples haven't even started yet.

That's why I can't understand this notion that China somehow holds the cards because it holds US debt and dollars. If China wants to commit economic suicide, the best way I can imagine is for it to attack the US by dumping greenbacks.

I know Scot, but the socialist left are still on page one of Investment and the Global Stratagy. So I've been using the socialist propaganda as my secret weapon if they demand that the Globe grow corn for fuel I invest. Now it's common knowledge that it's just as damaging to the enviroment as oil and it causes food shortages globally. Simply put; if the socialist say it's good I buy low and sell before they see that "Bright Light" known as Stupidity. It's a gamble but funnnnnnnnnnnnnnn. If the leftest propagandist say it's a good thing I buy low and get out when they are exposed as frauds. Really this is working well, like Mircro Credit was last year's cash cow. Alternate fuel is this years thang. Pasta is at an all time high at the moment, it's time to diversify and buy into pasta and grain based booze (hopps). NEVER mix the "Grape with the Grain" John Sanfort author.

If China goes after the US it's shooting it's self in the foot, I don't think the commies are that stupid.

[ScottSA]

Here's a hint: if GW is happening, buy northern real estate. You can get it for glass beads...oops, I mean peanuts. Even Alaskan real estate is cheapie cheapie in resource areas. If global warming is not happening, buy northern real estate; the so-called "green" portfolios will soon be sniffing in that direction. Maybe long term, maybe short, but whichever it is, you or your kids will be very happy. Oh, and PDAE , HYGS , and especially WWAT are stocks to look at for both long and short. I'm personally in WEGI at .07, but it's a hurricane stock that I'll be stuck with till March unless it runs...or unless there's a terrorist attack or another anthrax scare.

Needless to say, don't listen to me...what do I know?

[MountainMan]

Part the banks fault, part the persons fault.

Person knows that they cannot afford it, bank tells them they can afford it. Bank knows all to well that they cannot.

The sad part here is the bank wins either way. They get their money back in interest on the loan, or they simply take the house back if payments are not made. Either way the bank walks away with something.

People like to live above their means. Trying to live the high life on a low wage. Many do not prepare enough in order to purchase a home. It is the single biggest investment of anyones life. Not something that can be just taken care of half assed.

Other factors like job loss, or a recent disability, ect ect can also be a factor, then there is the issue with insurance (have it?). You spend quite a bit on insurance to keep everything safe in case something happens.

I'd love to buy a house, but I know I will not be finnancialy ready for a couple more years. And when I buy a house, it is not going to be large and fancy. Buy a home you can afford, and then make it into the home you want. Planning is essential in homebuying.

The bolded statement is why people fail.

The money I have put into my stock portfolio has tremendously outpaced the money I have put into my house. For 14 years, my mortgage has been $500-$600 a month, my investment in stocks has been under $200 a month for most of that time. The stock portfolio is worth more than the house, and certainly worth more than the gained equity of the house.

The house purchase was more of a hedge against inflation, rents go up, house payments do not provided you get a fixed rate. I re-financed after a few years in the house, and lowered my payment while reducing the length of the mortgage.

You are spot on about buying a house you can afford. I had just me and my 2 daughters, 1200 sq feet was plenty of house for us.

[buffycat]

Pardon for the offtopic post, but this is directed to GostHacked.

Have you looked across the river for property? The prices are FAR more reasonable than in Ottawa and with the improvements made recently to the infrastructure the Quebec side is far more accessable.

You can get a good bang for your buck and establish your mortgage credit at the same time. Around the Lac de Feis (sp) there are some wonderful places - all pretty much walking and biking distances to downtown Ottawa.

Too add: I agree with you Mountain Man - 1200 sq ft is by far enough space for three!!

I hate monster homes Too much cleaning!!

[Moxie]

Here's a hint: if GW is happening, buy northern real estate. You can get it for glass beads...oops, I mean peanuts. Even Alaskan real estate is cheapie cheapie in resource areas. If global warming is not happening, buy northern real estate; the so-called "green" portfolios will soon be sniffing in that direction. Maybe long term, maybe short, but whichever it is, you or your kids will be very happy. Oh, and PDAE , HYGS , and especially WWAT are stocks to look at for both long and short. I'm personally in WEGI at .07, but it's a hurricane stock that I'll be stuck with till March unless it runs...or unless there's a terrorist attack or another anthrax scare.

Needless to say, don't listen to me...what do I know?

LOL thanks for the tips, I think Global Warming is another leftard Propaganda thang. Like the iceage and Y2K but hello I can see me buying a farm for future developement in the North. 1/8 of an acre should do the job, Snicker. I'll pass on the hurricane stock though, plywood is a sure thang. Regarding the terrorist, I think I shall buy shares in a company that advocates no "Racial Profiling" it's the left in thang. After all people in wheel chairs should be searched, not Arab Muslims because Sept 11 was organised by the disabled and Bush. I see my portfollio having lots of stock in hugs and kisses, and feelings and tender sensibilities ergo I shall buy stock in Chickens. Mapleleaf chickens to be exact. Thanks Scot, you are cheaper than Wood you know who.

[kuzadd]

Moxie:

the Globe grow corn for fuel I invest. Now it's common knowledge that it's just as damaging to the enviroment as oil and it causes food shortages globally. Simply put; if the socialist say it's good I buy low and sell before they see that "Bright Light" known as Stupidity

Hmmm, and yet one would wonder why, why is George Bush and his gov, the big promoters of the "corn for fuel" scam????????

Are you claiming GW, promotes leftist socialist propoaganda????

http://www.washingtonpost.com/wp-dyn/conte...6042500762.html

I'll help you out k? as you do seem to need some assistance.

GWB:

"

Ethanol is a versatile fuel. And the benefits are easy to recognize when you think about it.

One, the use of ethanol in automobiles is good for the agricultural sector. I'm one of these people who believes when the agricultural sector is strong, America is strong. "

BUSH:

Ethanol is good for our rural communities. It's good economic development for rural America. You know, new bio-refinery construction creates jobs and local tax revenues. When the family farmer's doing well, it's good for the local merchants.

one can hear Cargill and Monsanto roaring with approval!

Ethanol is in no way shape or form a "lefty socialist idea"

what utter nonsense!

The use of ethanol is IN FACT a gift to big business and is utterly nonsensical from an environmental point of view.

It is a gift to Cargill, Monsanto, big factory farms, a boon for the GMO promoters, pesticide manufacturers.

Edited November 19, 2007 by kuzadd

[GostHacked]

Pardon for the offtopic post, but this is directed to GostHacked.

Have you looked across the river for property? The prices are FAR more reasonable than in Ottawa and with the improvements made recently to the infrastructure the Quebec side is far more accessable.

You can get a good bang for your buck and establish your mortgage credit at the same time. Around the Lac de Feis (sp) there are some wonderful places - all pretty much walking and biking distances to downtown Ottawa.

Too add: I agree with you Mountain Man - 1200 sq ft is by far enough space for three!!

I hate monster homes Too much cleaning!!

No, I have not looked at it. There is a drawback to it, with living in Quebec, but working in Ontario. The taxes, or claims for living in Q, but working in O, there are some regulations for tax purposes, and would not benefit me in the way I want. I would like something relatively close to where I work for I do not own a vehicle. Then again, in about 4 years when I am ready to buy a house, that could be an option if regulations change.

And yes, tooo much f*cking cleaning. I have a small townhome as it is right now, and with just me and my cat, it still can be a hassle to clean.

I do not think biofuels, hydrogen are the right course of action, they have an overall net loss of energy greater than any other current popular fuel (oil, gas, coal). Hydroelectric damns benefit us greatly however. Windmills, solar panels. Even new wave electric generation. (articulated bouys in the ocean that ride the waves producing electricity when moved).

Everything has an impact on our environment and our economy. I know a huge switch will hurt the economy in a drastic way, but there is going to be a point in time where it will hurt, and we are going to notice it. The depression can and should come after the fall of oil.

Also, I do not think that growing all this corn is causing food shortages. Food distrobution is the problem. Trust me, I work in a grocery warehouse for Loblaws. No shortage of food here at all. We are short on healthy affordable food however. All this food goes to sit on grocery store shelves untill you are ready to pick it up. Much of Africa and other poor countries do not have the food distribution infrastucture as Europe, North America and many other parts of the world. We could stand to share much of our food, since North Americans in general are getting fat, lazy and all the health problems that go with it. We would be a healthier and happier society if we change that ourselves.

[JerrySeinfeld]

OK Gostacked....you asked for it...

Banks "win either way"?

Here is an excert from Citigroup's recent earnings report:

-- Markets & banking revenues declined 24%, reflecting record transaction services revenues, up 38%, offset by a 44% decline in securities and banking. Securities and banking revenues declined due to write-downs and losses related to dislocations in the mortgage-backed securities and credit markets, including:

-- Write-downs of $1.35 billion pre-tax, net of underwriting

fees, on funded and unfunded highly leveraged finance

commitments.

-- Losses of $1.56 billion pre-tax, net of hedges, on the

value of sub-prime mortgage-backed securities warehoused

for future collateralized debt obligation ("CDO")

securitizations, CDO positions, and leveraged loans

warehoused for future collateralized loan obligation

("CLO") securitizations.

-- Losses of $636 million pre-tax in fixed income credit

trading due to significant market volatility and the

disruption of historical pricing relationships.

-- U.S. markets & banking revenues declined 87% and international revenues grew 7%. International revenues included strong double-digit revenue growth in Asia, Latin America, and Mexico.

In addition, BMO took at $300 million + charge, National Bank this morning announced a $365 million write down...all related to the US mortgage situation.

I could go on and on and on and on about how much wealth (and bank profit) has evaporated in the past quarter.

Next time you say "the bank wins either way" you should do some research.

[White Doors]

A good time to buy bank stocks with all of their juicy dividend cash flow... mmmm.....

The correction is being over stated. The subprime mortgage 'fiasco' will be a memory in 6 months.

jittery investors have made too much money and are looking for a reason to see doom and gloom.

50% of investing is based on knowing how the economy works. The other 50% is knowing how herds of cattle think.

[GostHacked]

OK Gostacked....you asked for it...

Next time you say "the bank wins either way" you should do some research.

They may loose money, buy they gain property. The former homeowner now has no money, and no home. So with this simple explanation, the bank can be viewed to win either way. Without getting into a course to earn an economic degree, this is what it boils down to correct??

Besides, it is all numbers and figures. They can be manipulated to show and prove anything. And they are in a knowingly risky business to begin with. They are part of the equation in this whole thing. The banks should not be willing to hand out large sums of cash to people then, they should be scrutinizing their clients more. And simply sh!t happens many times.

The banks have a large effect on our economy. They lend us the money with an interest and to have something put up for collateral (see this is the banks covering their own asses to minimize the loss impact. The banks make sure they look out for their own. The banks are always going to make a profit, hence the win win mindset that I have.

And the markets go up and down, they may 'loose' this quarter, but since most of the major banks have been recording record profits for the past few years, I won't be shedding a tear if the CEO cannot get that new Benz he always wanted.

OH and get this, people invest money right? So some people must invest in the housing market. Most of this is done through a financial institution like a bank. The investor MAY get a return on his investment, the bank makes money off his investement either way correct? they do charge a fee right? The banks are always making money, always. They will loose now and then yes, but they will always be able to bounce back because of the diverse investements the bank is involved in.

I am not a financial or economic expert, but when you boil it down to the basics without all the fancy terms, money simply changes hands while some other middle hand takes a cut, just for administering the transaction. And who's hands are getting the money? You may just be looking at the money flow instead of hard assets along with the money.

I invest in a house. I got 20 grand to throw up for it.

I get a loan from the bank, bank owns house untill it is paid in full.

I default on the loan, I am out of a house, money, and my credit goes to shit.

Can the bank ever default on a loan? Any reprocussions if this happens to a bank?

The bank has my payments up untill this point, at that time, they default me on the loan and take the house. They can resell it to others. The bank is out of the cash (for the moment) but gains the house and property as an asset. You cannot see this as a gain either way? The bank either gets paid in full or gets the house and property.

White Doors

The correction is being over stated. The subprime mortgage 'fiasco' will be a memory in 6 months.

jittery investors have made too much money and are looking for a reason to see doom and gloom.

EDIT le

This sounds like they are comparing growth spurts over a certain time period. Last year was better than this year, but there was a steady up trend for the last 5 years prior(don't quote me on this as a fact). Housing market has gone up and down up and down up and down. But look around you at all? There are more houses now than there was 20 years ago. Someone is making money off all this stuff. Guess who it is.

Edited November 19, 2007 by GostHacked

[White Doors]

They may loose money, buy they gain property. The former homeowner now has no money, and no home. So with this simple explanation, the bank can be viewed to win either way. Without getting into a course to earn an economic degree, this is what it boils down to correct??

Besides, it is all numbers and figures. They can be manipulated to show and prove anything. And they are in a knowingly risky business to begin with. They are part of the equation in this whole thing. The banks should not be willing to hand out large sums of cash to people then, they should be scrutinizing their clients more. And simply sh!t happens many times.

The banks have a large effect on our economy. They lend us the money with an interest and to have something put up for collateral (see this is the banks covering their own asses to minimize the loss impact. The banks make sure they look out for their own. The banks are always going to make a profit, hence the win win mindset that I have.

And the markets go up and down, they may 'loose' this quarter, but since most of the major banks have been recording record profits for the past few years, I won't be shedding a tear if the CEO cannot get that new Benz he always wanted.

OH and get this, people invest money right? So some people must invest in the housing market. Most of this is done through a financial institution like a bank. The investor MAY get a return on his investment, the bank makes money off his investement either way correct? they do charge a fee right? The banks are always making money, always. They will loose now and then yes, but they will always be able to bounce back because of the diverse investements the bank is involved in.

I am not a financial or economic expert, but when you boil it down to the basics without all the fancy terms, money simply changes hands while some other middle hand takes a cut, just for administering the transaction. And who's hands are getting the money? You may just be looking at the money flow instead of hard assets along with the money.

I invest in a house. I got 20 grand to throw up for it.

I get a loan from the bank, bank owns house untill it is paid in full.

I default on the loan, I am out of a house, money, and my credit goes to shit.

Can the bank ever default on a loan? Any reprocussions if this happens to a bank?

The bank has my payments up untill this point, at that time, they default me on the loan and take the house. They can resell it to others. The bank is out of the cash (for the moment) but gains the house and property as an asset. You cannot see this as a gain either way? The bank either gets paid in full or gets the house and property.

White Doors

EDIT le

This sounds like they are comparing growth spurts over a certain time period. Last year was better than this year, but there was a steady up trend for the last 5 years prior(don't quote me on this as a fact). Housing market has gone up and down up and down up and down. But look around you at all? There are more houses now than there was 20 years ago. Someone is making money off all this stuff. Guess who it is.

Homebuilders?

Look, the banks are just businesses. If you are compkaining about banks, you should be complaining about Canadian banks - well actually - the Canadian bank act. It restricts competition. There are good things in it which prevent bank failures compared to the US but it really needs to be reformed.

Look, you seem to be arguing that banks shoudl lose more money - but leet me tell you, when a bank closes up shop, no one wins including you. The bank can lose money because the value of that 'asset' can go down in value when it starts happening alot - which is exactly what is going on in alot of home markets in the US.

PS: It's spelled 'lose'. ie: The leafs will 'lose' to the sens next game. not: You're girlfriend is 'loose' Why is that word mis spelled so often?

Edited November 20, 2007 by White Doors