Black NJ: Bail Out Homeowners, Not Bankers!

Saturday was a day for summing up Presidential Debate number one. It was also the day that members of New Jersey's People's Organization for Progress (POP) delivered a summation of their own. They had watched two presidential candidates stand in front of a huge national television audience, hemming and hawing about bailing the US financial system out of economic catastrophe and not saying a whole lot about how the country got in this mess.

So Saturday at one, a couple of dozen POP members wearing their trademark yellow t-shirts rolled out at Broad & Market, the historic and commercial center of Newark, to say "Save Our Houses, Don't Bail Out Billionaires."

Folks clambering off NJ Transit buses took in the scene and stopped for a bit to hold a sign, join the line, chant for a time, before heading off to do their weekend shopping. A television crew showed up to film it and the Newark Star Ledger featured it in a story on their website.

The plan for the protest was settled only two days earlier at the weekly Thursday night General Assembly of POP, as members expressed outrage at the bailout. After watching--and protesting--as hospital after hospital in north Jersey closed for lack of funds in recent years, they were already mad. Now, just let the big banks and finance companies get in trouble and the government ponies up $700 billion in a few days. Members also highlighted the additional hundreds of billions pumped into the war since 2002.
To see more pictures from this important event, check out this photopage.

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Bite Size Bad News 1--First Mortgages

[I've been reading the business press, including blogs, a lot lately. It's like watching a train wreck in slo-mo. That's where I got the oil strike story I posted yesterday. Since I lack both time and theoretical chops to write much in the way of long analyses of the unfolding economic crisis. I'm trying a new thing--occasional short pieces highlighting one or another tidbit that has caught my attention.]

The weekend edition of the Wall Street Journal provides one more reason the housing crisis isn't going anyplace soon. It's not just that the supply of houses for sale is up (to 2.3 million according to Bloomberg News), what with falling sales, foreclosures, overproduction of new units and rising fuel costs making the exurbs look much less attractive. The banks are acting snakebit:

Lenders are demanding higher credit scores, mandating private-mortgage insurance on many more loans, and requiring larger down payments. Fewer first-timers qualify for the house they want, or they're paying a larger monthly amount to own it.

In an interview with an 89-year-old financial historian (on the same page) we get a sense of what this exercise of caution on the part of banks and other mortgage lenders may really represent on a much larger scale:

When you think about how all of this will work out in the long run, we are going to have an extremely risk-averse economy for a long time. The lesson has painfully been learned. That's part of the problem going forward. You don't have a high-growth exit from this, as you've had from other kinds of crises. We won't have a powerful start, where the business cycle looks like a V. Here, the shape of the business cycle is like an L, where it goes down and doesn't turn up.

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Take Five: "Jingle Mail" and the Language of Financial Crisis

[From time to time Fire on the Mountain features, on Fridays, Take Five--a list of five cool things in some particular category. It's not the top five or anything; the idea is you can chip in your own suggestions for the list in the comments sections below.]

As the US business press and government spokescritters set an example for us by clapping as hard as ever they can to keep the Tinkerbell that is the US economy fluttering bravely around, the outlook in more serious venues has more the flavor of Clint Eastwood squinting into the sun-fried desert and not much liking what he sees out there.

Lately I've taken to reading the economists of the blogosphere, like Bonddad and Mish, and taking an icy plunge into the Financial Times almost every day. From a standing start, this isn't the easiest leap for me, given that I finished with high school some time during the Coolidge administration and am math-challenged to boot. One thing that has helped me wade through the thickets of CDOs, SIVs, the ABCP market and other acronyms are the snappy new expressions the crisis has given rise to, largely in the form of gallows humor from within financial circles.

TAKE FIVE

Herewith, my current five favorite new coinages and catchphrases from the spreading credit crisis:

"Jingle mail"--My top favorite, and a nightmare to mortgage holders. Jingle mail refers to envelopes that banks are getting containing the keys to houses which flat-broke borrowers are walking away from, and, via synecdoche, to all of the people who are abandoning homes it no longer makes sense to pour money into.

"Underwater"--Why there's so much jingle mail. Falling house prices means that more and more people owe more on their mortgage than they could realize if they sold their house. A lot of people are underwater. A recent Moody's report estimates that 8.8 million homeowners today have zero or negative equity.

"We're all sub-prime now"--A rueful sumup in financial circles of the fact that the collapse in value of subprime mortgages has spread to all kinds of financial instruments, including ones based on credit card debt and other consumer loans as well as on stocks and bonds, creating massive and unpredictable risks of failure.

"The Great Unwind"--The next few years, probably. The super-complex and arcane nature of the fancy "investment opportunities" cooked up by the folks repackaging and selling various sorts of debt, combined with the fact that there's been almost no market in them since since way last fall ('cos who'd buy them), means that nobody has a clue how much shaky, highly-leveraged debt is out there or how much any of it is actually worth. (And it's a moving target to boot--if, say, home prices continue to crater or the rate of credit card default starts climbing rapidly, it's all worth less). All this stuff has to be unentangled and brought into the light of day, even as no individual CEO wants to acknowledge how badly his firm is suffering. That means it may take several years for the present mess to unwind itself via a start and stop process which will include the formal unpackaging of some of these financial instruments, massive bargain hunting and dog dumping in the financial markets, bankruptcies (and taxpayer-funded rescues of those deemed "to big to fail"), and, who knows, maybe even government investigations and hearings, leading to new regulations.

"Worst crisis since World War 2"--What the Great Unwind is pushing us into, according to both Alan Greenspan & Martin Feldstein, head of The National Bureau of Economic Research. In the same week, no less. I like this miniature exercise in smoke and mirror deployment, too. The Second World War was, of course a time of deep, broad and rapid economic expansion in the US. What this actually means is "since the Great Depression," the decade immediately preceding the war, but neither this pair, nor the talking heads who echo them, is about to utter the D-word in public.

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