A Crisis of Confidence

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This article in the Wall Street Journal caught my eye.  Why?  Here's a taste:

Forty-one states and the District of Columbia permit lenders to sue borrowers for mortgage debt still left after a foreclosure sale. The economics of today's battered housing market mean that lenders are doing so more and more.

Foreclosed homes seldom fetch enough to cover the outstanding loan amount, both because buyers financed so much of the purchase price—up to 100% of it during the housing boom—and because today's foreclosures take place following a four-year decline in values.

"Now there are foreclosures that leave banks holding the bag on more than $100,000 in debt," says Michael Cramer, president and chief executive of Dyck O'Neal Inc., an Arlington, Texas, firm that invests in debt. "Before, it didn't make sense [for banks] to expend the resources to go after borrowers; now it doesn't make sense not to." 

Indeed, $100,000 was roughly the average amount by which foreclosure sales fell short of loan balances in hundreds of foreclosures in seven states reviewed by The Wall Street Journal. And 64% of the 4.5 million foreclosures since the start of 2007 have taken place in states that allow deficiency judgments.

Lenders still sue for loan shortfalls in only a small minority of cases where they legally could. Public relations is a limiting factor, some debt-buyers believe. Banks are reluctant to discuss their strategies, but some lenders say they are more likely to seek a deficiency judgment if they perceive the borrower to be a "strategic defaulter" who chose to stop paying because the property lost so much value. 

For years and years and years owning a home has been seen not only as the American dream but also as a potentially lucrative investment.  There were certainly plenty of personal finance experts who warned against viewing your house that way, who pointed out the inherent risk of homeownership, but given the meteoric rise in real estate values from them mid-90s to the mid-00s it's hard to blame people for viewing their homes as investment vehicles.  Now, of course, it's become all too clear that your house can actually become a financial albatross, decreasing in value to the point that you can't afford to move even if it means getting a job in another city after being laid off. Worse, as the article points out, your home can become a debt grenade that blows apart your entire financial existence.

In my opinion there's a kicker here that not a lot of people are talking about.  Many of the people being decimated by the housing crisis have children who are watching this and who are going to come of age believing that homeownership is a risky endeavor.  They'll have experienced the housing crisis viscerally, in much the same way my grandparents experienced the Depression, and I think their behavior will be affected accordingly.  Let's put it this way – my grandparents never gave up their frugal habits.  They reused everything, they saved all leftovers (you learned real fast that my Granny had no expiration dates on the food in her freezer and you ate at your own risk), and pinched every penny within an inch of its life 40+ years after the depression ended and they were living a very comfortable middle class life in Winston-Salem.  You just don't forget those experiences and I think the number of kids who will have seen the flip side of the American Dream will always view homeownership with a great deal more skepticism than those of us who came of age having only seen the positive side of homeownership.

Note: I need to point out that these opinions are mine and don't reflect an official position by my employer or anyone I work with.  

A Job Well Done

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As someone who has served on the Lewisville Board of Adjustment in the past I read this post by attorney Tom Terrell with more than a passing interest. Basically he lauds the Harnett County Board of Adjustment for their hard work on a landfill case that took 33 hours spread over six nights to conclude. Most people have no clue what boards of adjustment do, and quite frankly the people who volunteer their time to serve on most municipal boards like BOAs don't get enough credit for their efforts, so it's nice to see when someone who deals with them on a professional level takes the time to give them their due.  Here's a bit of what he wrote:

After six nights and 33 hours of testimony and deliberation, the Harnett County Board of Adjustment reached a decision this week regarding a Conditional Use Permit for a regional landfill.  It was a marathon.  I know, because I was there…

The hearing demonstrated why we desperately need quasi-judicial proceedings and, despite what I consider to be demonstrable legal flaws in the decision itself, provided a showcase example of how a BOA should operate.

Quasi-judicial proceedings establish evidentiary frameworks for unpopular but necessary land uses.  Without them, the alternative is a decision based purely on emotion and, sometimes, hysteria.  Or bad math.  (Let’s just count the number of people in the room for and against and let it be “democratic” despite what our comprehensive plan says, despite what our zoning ordinance says, despite what our staff says, and despite what our planning board says)…

But my other point is that this BOA was among the best I’ve ever seen in how it handled the hearing itself.  Each night board members systematically disclosed calls from the media and emails from neighbors and how they handled them. They disclosed civic and personal connections with witnesses.

The board chair did a better job ruling on objections by attorneys than most judges I’ve been in front of, and he gave some leeway to members of the public to stray from true evidence (in one case, a speech on “the purpose of man”) and to relate blatant hearsay conversations while instructing and reminding board members what can and cannot be considered as evidence.

He also praised the Harnett County staff members and I think he's absolutely spot on when he says that "I’ve learned never to underestimate the importance of working with good staff." I've been lucky enough to work with many of the staff members in Lewisville and I can say that it has always been an enjoyable and rewarding experience.  

Governments Don’t Rule the World, Goldman Sachs Rules the World

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I have no idea if the guy in the video below is legit or if he's just a blowhard who happened to score a BBC interview, but his comments raise some interesting questions.  Comments like "The governments don't rule the world, Goldman Sachs rules the world" and "For most traders we don't really care that much how they're going to fix the whole situation. Our job is to make money from it" beg the questions, "How do the Goldman Sachs rule the world without a stable society provided by governments" and "At what point do traders and the rest of the players in the financial market put aside their short term (profit) interests and do what's best for society at large?"  For that last question I'll ask those who are more educated in the ways of the economy – is it possible, or even advisable, to ask financiers to forego short term gains for the greater good or is it always in our best interest for them to always pursue what's in their best interest?

Charles Kuralt’s Dad Was Involved In NC Eugenics Program

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An interesting article in the Charlotte Observer outlines how Wallace Kuralt, father of longtime CBS newsman Charles Kuralt, led Mecklenburg County to sterilize the larger number of people than any other county in North Carolina's infamous eugenics program.

Compassionate. Visionary. A champion of women and the poor.

That's the reputation that Wallace Kuralt built as Mecklenburg County's welfare director from 1945 to 1972. Today, the building where Charlotte's poor come for help bears his name – a name made even more prominent when his newscaster son, Charles Kuralt, rose to fame.

But as architect of Mecklenburg's program of eugenic sterilization – state-ordered surgery to stop the poor and disabled from bearing children – Kuralt helped write one of the most shameful chapters of North Carolina history.

The Charlotte Observer has obtained records sealed by the state that tell the stories of 403 Mecklenburg residents ordered sterilized by the N.C. Eugenics Board at the behest of Kuralt's welfare department.

It's a number that dwarfs the total from any other county, in a state that ran one of the nation's most active efforts to sterilize the mentally ill, mentally retarded and epileptic.

Read more: http://www.charlotteobserver.com/2011/09/26/2637820/wallace-kuralts-era-of-sterilization.html#ixzz1Z4FbwoS0

 

She Makes a Good Point

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I’ve liked Elizabeth Warren since I saw her in a documentary about the credit card industry.  She makes a lot of sense a lot of the time.  If you watch this short clip I think you’ll find what she says to make a lot of sense, but if you’re like me you’ll recognize that in the end she leaves one large question unanswered: “How big a chunk should the successful factory owner pay forward?”  Watch the video and you’ll know what I’m referring to.

Like I said I don’t think anyone, well at least anyone who’s semi-adult and reasonable, will dispute that the successful factory owner didn’t get that way on his own and benefited from the many resources provided by our society and that the factory owner needs to “pay it forward.” I do think, however, that many semi-adult and reasonable people can and will disagree quite vehemently as to HOW MUCH the factory owner should pay forward.

Ethics are important?

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Every class, seminar, training session, etc. I've attended that's had the subject of ethics has seen an almost instant mental "check out" of all the attendees.  It seems to be one of those subjects that everyone acknowledges as important but also as unnecessary to discuss.  You're either ethical or you're not, what's there to discuss?

Well, when you see stories like this you realize there's a whole LOT to discuss:

According to the Post, the groundwork has been laid "for scientific advances that would allow drones to search for a human target and then make an identification based on facial-recognition or other software. Once a match was made, a drone could launch a missile to kill the target."

Of course, at some point a human would have to decide what information the drones would be given — presumably, for instance, the data to be used to identify the individuals it might target.

But as the Post adds, "the prospect of machines able to perceive, reason and act in unscripted environments presents a challenge to the current understanding of international humanitarian law."

Here's a link to the Washington Post story that is referenced in the quote.

The Most Patriotic Thing You Can Do

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Mark Cuban says the most patriotic thing you can do is "Bust your ass and get rich." More:

I’m not against government involvement in times of need. I am for recognizing that  big public companies will  continue to cut jobs in an effort to prop up stock prices, which in turn stimulates the need for more government involvement.  Every cut job by the big companies extracts a cost on the American people in one way or another.

Entrepreneurs are needed to create and grow companies to absorb those people in new jobs. If entrepreneurs don’t create those jobs, the government ends up having to spend more money to help them one way or another…

In these times of “The Great Recession” we shouldn’t be trying to shift the benefits of wealth behind some curtain. We should be celebrating and encouraging people to make as much money as they can. Profits equal tax money. While some people might find it distasteful to pay taxes. I don’t. I find it Patriotic.

I’m not saying that the government’s use of tax money is the most efficient use of our hard-earned capital. It obviously is not. In a perfect world, there would be a better option. We don’t live in a perfect world. We don’t live in a perfect time. We live in a time where the government plays a big role in an effort to help lead us out this Great Recession. That’s reality.

So I will repeat my point. Get out there and make a boatload of money. Enjoy the shit out your money. Pay your taxes.

It’s the most Patriotic thing you can do.