Everyone was in on the Housing Bubble
One of the bigger myths about the Great Housing Bubble is that it was just about poor people who took out sub-prime mortgages. Not true. Just about everyone leveraged themselves to the max, with dollar signs in their eyes:
The former New York Mets and Phillies baseball player Lenny Dykstra recently filed for bankruptcy protection. He had purchased Wayne Gretzy’s gorgeous Thousand Oaks home for $17.5 million. The home was recently on the market for $25 million then dropped to $16.5 million.
“(ESPN) Walter Hackett, a lawyer for Dykstra, said the event triggering the bankruptcy filing was a planned foreclosure sale of a southern California residence that Dykstra bought from hockey legend Wayne Gretzky for $17.5 million in 2007.
Dykstra is “in good spirits,” Hackett said in an interview. “He understands now that bankruptcy is truly a protective act. I do expect that Lenny is going to emerge from Chapter 11, and make those people whole who have legitimate claims.”
According to the bankruptcy petition, Dykstra’s largest unsecured creditors include units of JPMorgan Chase & Co., owed $12.9 million, and Bank of America Corp, owed a combined $4.2 million.
Hackett said Washington Mutual, now part of JPMorgan, was the main lender on the 2007 home purchase, and that the bank misled Dykstra about his ability to afford the property. The lawyer said the bank deserves nothing on its claim.
JPMorgan spokesman Tom Kelly said: “We don’t comment on individual cases, but we expect our customers to repay their legal obligations under their mortgages when possible.”
Bwahaha! $12.9 million plus $4.2 million comes out to $17.1 million! You mean to say on a $17.5 million dollar place Washington Mutual and Bank of American allowed virtually a zero down play? I was searching for the home in the MLS but it doesn’t seem to be there given the bankruptcy filing which will now forcibly sort things out. In April it was reported by Zillow that Sotheby’s International had the home listed at $25 million which obviously did not sell. The current Zestimate is $13.1 million. Apparently, multi-million dollar properties are not immune to the busting housing market. And if you want to see leverage, take a look at this:
“The 46-year-old has no more than $50,000 of assets and between $10 million and $50 million of liabilities, according to a petition filed Tuesday with the U.S. Bankruptcy Court in the Central District of California.”
Maximum leverage. I find it hard to believe that there is still a sizable contingent of anti-math folks that believe this entire global credit mess was created by subprime borrowers. They think that poor people in the inner city somehow led to $13.87 trillion in household wealth being wiped off the balance sheet. Try telling these people that some $1 trillion in subprime loans does not equal $13.87 trillion in wealth destruction. The reality is much of this is a distraction from their puppet masters on Wall Street and the true crony-banking machine.
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July 14th, 2009 at 9:01 pm
We still have low interest rates and will probably continue this strategy along with lots of debt so should be interesting to see how this plays out in the long-run.
Yahoo Finance was talking about a new derivatives market where you can bet on the long run prices of homes so hedge that they’ll go up or down over various periods of time. I can’t remember what they said exactly, but it was something like 10% down in 8 years from today or something to that extend. I’ll see if I can find the interview.
July 15th, 2009 at 4:46 am
You totally missing the point. Noone is saying poor people caused this bubble. What caused this bubble was policies that encouraged increased home ownership. Once the tools were inplace to follow through on that philosophy, they were made available to everybody. You couldn’t target them to a certain segment of the population. You had to make them available to everybody which allowed people to puchase more house than they could afford on every income level.
July 15th, 2009 at 4:53 am
I guess poli has a hard time understanding how a match can cause a raging forest fire that consumes large trees.
July 15th, 2009 at 6:01 am
Was Dr Dog’s OPEC AMERICA thread on bejohngalt taken down.
I went back to reread it bc it sounded so surprising, and it was gone.
Must have been a mistake?
July 15th, 2009 at 8:55 am
Poli, actually the jokes on you.
1) Not everyone was in on it.
2) Being overleveraged does not lead to wealth creation. So if that is the case, then there was no wealth to begin with. Which means that there was no wealth to be destroyed. That’s the biggest fallacy of all in the who mtg meltdown discussion.
July 15th, 2009 at 9:53 am
Dr. Dog…since you’re here was there an error in your blog about that giant find in North Dakota?
It sounded unrealistically large to me.
July 15th, 2009 at 10:45 am
Recent book examines Kennedy assignation and concludes\speculates that the CIA killed JFK.
Here’s a review that I found interesting.
“The Bay of Pigs invasion of Cuba was planned by the CIA to regain control of the island and to re-open the casinos for organized crime. President Kennedy refused to provide air support for the Cuban brigade because he knew that he had been lied to by the Joint Chiefs of Staff and by the CIA; the invasion had been designed to fail without U.S. support but they hadn’t told this to JFK who refused to fall into their trap. During the Cuban Missile Crisis, JFK once again enraged the CIA and the Joint Chiefs by resisting their tremendous pressure on him to take military action which would have led to nuclear war.”
and
“Following that crisis, JFK became intent on ending the Cold War by establishing a peaceful relationship with the Soviet Union. However, many CIA and Pentagon personnel believed that it was better to be “dead than red” and that it was preferable to destroy civilization rather than let the Communists rule. They also knew that war generated billions of dollars into the arms industry. As a result, they would repeatedly subvert the President’s policies and isolate him within his own government. Enter some more despicable characters: Richard Bissell, Charles Cabell, Henry Cabot Lodge, Lyman Lemnitzer, Curtis LeMay and perhaps the most contemptible of all, Allen Dulles. Ironically, JFK learned to trust Khrushchev more than people within his own government.”
And
“President Kennedy was aware of the power of his enemies and he knew the dangers facing him. But he persevered and mandated that all U.S. personnel would be withdrawn from Vietnam; he was determined to never send in combat troops even if this meant defeat. He also refused to intervene militarily in Laos. He exchanged private letters with Khrushchev, which infuriated the CIA, and secretly initiated plans to attain rapproachement with Cuba, which further incensed the Agency. Cuba’s Fidel Castro, whom the CIA hated as intensely as it hated Kennedy, was equally eager to begin an American-Cuba dialogue. In fact, Castro was meeting with a JFK representative when the President was murdered. JFK died a martyr and the forces of evil that killed him also killed his vision of peace.”
And
Lyndon Johnson, the CIA’s ally, assumed the presidency. He cancelled talks with Khrushchev and refused Castro’s pleas to continue the dialogue. He reversed JFK’s withdrawal plan from Vietnam as well as his plan to neutralize Laos. The military industrial complex took control of the country. The policy of plausible deniability led the way to assassinations of foreign leaders, the overthrowing of foreign governments and horrors committed all over the globe. If JFK had not been murdered, we would not have had the prolongation of the Cold War, the Vietnam War, Watergate, the purported War on Terror and the steady moral deterioration of America. Interestingly, one month after JFK’s assassination, President Truman wrote an article for The Washington Post cautioning about the threat of the CIA taking over America.
The author meticulously examines the evidence and draws conclusions which ring with unassailable truth: (1) The CIA coordinated and implemented he assassination of President Kennedy, an act of treason which destroyed democracy in the U.S. (2) The Warren Commission was created to propagate lies to conceal the truth from the American people. (3)There has been a continued cover-up by successive administrations and their stooges in the mass media. (4)The murder of JFK is directly related to the current domination of the American people by powerful oppressors within a shadow government that will continue to insist that only sustained war can keep the country safe from its enemies, never admitting that they themselves are the supreme evil.”
July 15th, 2009 at 1:37 pm
invalid10,
last week I watched the film “13 days” (starring kevin Costner) which historically portrayed how the Cuban Missile Crisis was handled by JFK/RFK and the gov’t meetings that occured w/the CIA and Armed Forces brass. I wasn’t around at the time and found the movie very insightful … supposedly it is very accurate in its details of meetings and relationships between the players as there was much painstaking research that went into the book it was based on.
Aside from the CIA, there is also the theory, which you may know, that JFK assassination was master-minded by the Fed, who JFK threatened to put out of business when he signed Executive Order 11110 on 6/4/63.
Is Rand Paul running for sure? though he was waiting to see if Bunning stepped down. I’d rather see him replace Mcconnell in 2yrs if Bunning stays.
July 15th, 2009 at 1:58 pm
jeff99az,
I don’t spend too much time pondering JFK. I did read Profiles in Courage because that won a Pulitzer Prize, but that had more to do with the Cuban Missile crisis and didn’t walk much about the Bay of Pigs stuff.
I can see a botched CIA plot that was mean to fail unless the president committed the military so as to drawn JFK in though. There are all sorts of insane interest groups and conspirators in D.C. trying to influence things.
July 15th, 2009 at 2:00 pm
JFK was hardly a peacenik in that book. He was pushing us towards nuclear war so that he could look “tough” for the voters.
Luckily the Russians were much calmer about it that time.
July 15th, 2009 at 2:50 pm
Oh…GAWD…Acorso has two or three other sockpuppets and he is having a running conversation between them about….JFK. Acorso, JFK ordered..I repeat….he ordered the coup of Ngo Diem in South Vietnam by the CIA. Now if he was going to pull troops out of Nam…where he had put them….why do you think he ordered a coup? DUH!!!! As to the Bay of Pigs….he and his cabinet selected the Bay of Pigs to be the invasion point…….JFK did that, not the CIA nor some shadow goverment…JFK picked the spot. You know I’m sure you can find some more Truthers somewhere around to join in your Jewish Cabal – CIA plot…..
July 15th, 2009 at 3:58 pm
budahmon,
See my previous post….I was casting JFK in a different light from the one book that I actually have read about him (Profiles in Courage.)
I stated that he came across as no peacenik in that book, and even bordered on war-like. I will say that my impression of the CIA as a really shady organization is pretty much in line with that book reviews impression.
As for that comment about the Fed killing JFK…not my words!
July 15th, 2009 at 4:19 pm
budahmon,
LRC linked to the JFK book so that’s why I was reading its review.
I definitely think at least from an ideological perspective, the idea that the CIA killed a U.S. president appeals to me, but whether that was what actually happened who knows. The CIA is a particularly nasty organization so if there was proof to discredit it, then that would be a really good thing. However, I doubt we could ever get rid of a government agency even if people were able to prove it shouldn’t exist or that it’s evil etc.