Special Weekend Open Thread Extra: Nearly NARmal
Here’s a great place for an Open Thread: right on top of a Can You Top This letter from the President of NAR (the National Association of Realtards).
This is Ron Phipps’ letter to The Wall Street Journal in its entirety, because you won’t want to miss one single stupefying word of it.
Thanks very much to Burbed reader PKamp3 for mentioning this exchange in comments.
The Wall Street Journal would have people believe that hard-working, middle-class families are not affected by lower conforming loan limits, when nothing could be further from the truth ("More McMansion Subsidies," Review & Outlook, Nov. 1). The representatives in Congress who support higher loan limits understand that this is not a partisan issue, as you are trying to make it out to be.
The majority of markets impacted by the loan-limit decline are not high-cost areas. For example, more than 100 counties throughout the Midwest and more than 200 counties in the South have seen loan limits decline by more than $64,000.
And despite how your editorial tries to position the issue, the loan limits are not the same as reforming Fannie Mae and Freddie Mac. Allowing the mortgage loan limits to expire in October was an arbitrary decision. Creating more market disruptions before reforming mortgage markets will only hurt our recovery.
The Senate measure to reinstate the limits is temporary—restoring the higher limits while the housing and mortgage markets stabilize. Recently, economist Mark Zandi said policy makers could shore up the housing market by "extending the current higher conforming loan limits that are set to decline in a few weeks." Borrowers, not taxpayers, will bear the entire cost of the higher loan-limits provision.
As people across the country are trying to gain a foothold in these trying times, we need to give them the resources to do so. The National Association of Realtors applauds the members of Congress who are standing up for America’s families rather than turning their backs on them.
Ron Phipps
President
National Assn. of Realtors
Washington
Of course this is 100% Grade AAA horseapples and every one of us should feel stupider for having wasted three minutes in reading it. In fact, this is such toxic waste even the WSJ editorial page couldn’t leave it without a response as an unsigned opinion piece. (It’s behind the paywall, but the best way to find it for free, should this link not work, is to search for its title with teh Google.)
The Realtor Subsidy
Crony capitalism on parade.
To understand why 90% of U.S. mortgages are still underwritten by taxpayers, look no further than the nearby letter from Ron Phipps of the Realtors lobby. He makes clear that the Realtors, like the rest of the housing-subsidy crowd, are working hard to get Congress to reinstate a $729,750 loan-limit for Fannie Mae and Freddie Mac guarantees.
Notice how Mr. Phipps doesn’t mention that dollar figure, perhaps because it makes a howler of his claim that the loan-limit reduction in October to $625,500 is somehow a blow to the "middle class." As House Financial Services Chairman Spencer Bachus and several colleagues note in a November 7 letter to GOP appropriations conferees, "the lower loan limits only affect a very small slice of wealthier homeowners in high cost areas." Only 1.3% of all loans done by Fannie, Freddie and the Federal Housing Administration would be affected by the change.
And it goes on from there. I’m sure you could write your own takedown of Phipps’ inane, self-serving, logic-free effluvia, and in fact I bet you could have a lot of fun with it. I am chucking a bit noting the Wall Street Journal use the terms “crony capitalism” and “lobby” as if they’re bad things. Should we look forward to them setting up a tent (mink-lined, probably) in Zucotti Park?
Here’s a few more things the WSJ neglected to mention but I’ll bring up.
- The “non-high-cost areas” affected purportedly include more than 100 flyover counties in the Midwest and 200 in the South. Phipps neglected to tell you how many total counties are worth flying over, but I suspect it’s more than 300.
- A free clue: Georgia has 159 counties.
- Borrowers will bear the entire cost? Oh, now borrowers fund their own tax deductions? Then why is the deficit so high? Do corporations fund their own R&D credits too?
- And remember, this is your Weekend Open Thread!
November 12th, 2011 at 8:40 pm
Sure, the WSJ calls it “crony capitalism.” That’s because the beneficiaries are realtards and not big bankers.
November 13th, 2011 at 7:46 am
Pre-bubble-pop only about 50% of mortgages were underwritten by the GSE twins.
Relevant question: is a ‘thumbs down’ on this article a good thing?
November 13th, 2011 at 8:10 pm
Relevant question: is a ‘thumbs down’ on this article a good thing?
That depends on how one defines “good” and “thing”.
November 17th, 2011 at 9:45 am
Solyndra, once considered a representation of the strength of the RBA, continues to unravel. Back in 2009, nomadic suggested, “It is interesting that Solyndra is building its second solar plant in Fremont. However, they were founded here (I think by a lot of ex-Applied Materials people), and the government just granted them a $535M guaranteed loan to finance the majority of the construction costs. The company is still relatively small so it makes sense to put the manufacturing close to all of the engineering.”
Today from the Washington Post, author Brad Plumer writes:
“10:50 Why Solyndra failed. Secretary Chu argues that Solyndra failed because ‘the price of solar panels dropped precipitously, in a single year dropped by 40 percent.‘ He chalks this up to two factors—ramped-up production in China and decreasing subsidies in Europe that softened the market.”
Like housing, sounds like the basic assumption was for higher prices, or, at a minimum, stable prices. You know, the basic claim is how could anyone have known prices could go down? Multimillion dollar homes with little to no income should be the norm, not the exception. Multibillion after a few ‘automatic price doubles.’ We probably needed some income tax incentives to make it all better.
“So why, when Solyndra first ran into trouble, did the Energy Department decide to restructure the loan? ‘At that point,’ Chu says, ‘we had a half-completed factory, and we had two choices — we either had to stop the loan, which would’ve put Solyndra into immediate bankruptcy, or we could continue on contract of the loan to build the factory.’ That restructuring put taxpayers at greater risk of not recouping their investment (although it remains to be seen how much the government will actually recover). ‘It was a difficult decision,’ Chu concedes.”
This is a classic problem of not understanding sunk costs. Investing more in a really bad investment will never make it better. I hear this too often, and it’s always basically the same: “But I’ve already spent $$$$$, so spending more $$$$ is a good move.” Wrong.
Spending more will not turn Pb into Au–but you don’t understand, I’ve already spent $$$$$, so of course spending $$$$ more is a good idea.
November 17th, 2011 at 4:47 pm
Hey everyone! NAR got its way…
http://online.wsj.com/article/SB10001424052970204190504577038072720745902.html?grcc=ffcfa0adbfd0e59c261a60a140c3e020Z3&mod=WSJ_hpp_sections_opinion
Can we dissolve our government like the Europeans and start over with an all-new Congress?
November 17th, 2011 at 11:32 pm
I have high respect for Michael Bloomberg, even if he’s not near the RBA.
November 17, 2011-
I have no demographic information about the protesters, but I would guess that there are quite a few who are former home loaners. And while that might be tragic, the bigger problem is that the protesters have the opinion that their time is best spent camping out in parks across America.
Speaking about high productivity, today when asked about basketball, the NBA lockout, I suggested that of course basketball adds to the economy: Occupying a stadium and watching a ball go back and forth from one end of the court to the other end is very productive, and I cannot imagine the sacrifices we all must make when we have no basketball.
November 18th, 2011 at 12:19 am
“I have no demographic information about the protesters (…)”
here’s a start… http://www.theawl.com/2011/11/25-arrested-reporters-and-what-they-do
November 19th, 2011 at 9:21 am
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November 22nd, 2011 at 12:22 pm
NFLX update:
“(Reuters) – Netflix Inc’s shares dropped as much as 7 percent on Tuesday after it warned of a loss for 2012, a move the prompted several Wall Street analysts to cut their price targets for the online video and DVD rental company.”
Yes, losses, for the entire 2012 year.
Next, when you have losses what do you do? Borrow zero coupon money and sell equity:
“The Silicon Valley / San Jose Business Journal reports that the Los Gatos, Calif.-based video rental company (NASDAQ: NFLX) announced that Palo Alto, Calif.-based Technology Crossover Ventures will buy $200 million in zero-coupon senior convertible notes and T. Rowe Price Associates Inc. funds will buy $200 million in stock.”
“Meanwhile, Netflix has been spending money buying back its own stock, including $199.7 million worth of buybacks in the first nine months of 2011, at an average price of $222 a share. Netflix’s stock price is about one-third of that level now. The Netflix spokesman said since the company started a stock buyback program in 2007, it has paid an average cost of about $45 apiece for those repurchased shares.”
So this year Netflix paid $199.7M at an average price of $222 per share, and sells near $75 per share to raise $200M in new capital?
Better hope the latest content investment is “robust enough” to provide a value to both customers and investors.
Netflix’s fiscal year ends December 31, and I am looking forward to reading their annual report.
Today is any part of Los Gatos in the RBA?