US GDP shrinks 2.9% in first quarter

[capcc76]

The US government does several things well:

>>> borrows tons of money

>>> convinces everyone, from bankers down to panhandlers that it's manageable to constantly borrow so much.

>>> hands out truckloads of money to people who say they're needy, but are really just lazy and greedy.

>>> spends 50X more for goods and services, than you or I would (same as Thai gov't).

>>> bails out badly managed companies and banks which are 'too big to fail.'

>>> gives tens of billions of dollars to largest banks, so general public will think the banks are solvent. That's what it did in late 2008. Those banks were told to take the low interest billions, and what did the banks do? Loaned it out at high interest. Wow, great for the big banks: get nearly free money from Uncle Sam, and make tubs of money on it.

Where do you get your info?

Banks repaid TARP. TARP was to fill in void left by CMOs and allow banks to meet reserves and remain viable.

Interest rates charged by banks are low now and were low back during TARP bailout late 08/09 and forward. Banks, however, had extremely stringent credit criteria and were making very few loans during the timeframe you mentioned.

In late 08 and 09, only A paper high credit score consumers meeting stringent qualifications were getting approved for loans by banks and consumers with A credit were being charged some of the lowest rates in history. Lending was still very tight up to about 2011 so we did not have a bunch of unsophisticated consumers out there being gouged with high interests loans in 08-11 as you suggest.

2009 rates in March and lending criteria

http://money.cnn.com/2009/03/19/real_estate/rates_low_approvals_too/

2010 rate chart

http://www.biggerpockets.com/renewsblog/2010/12/27/2010-interest-rates-existing-and-new-home-sales-up-and-a-look-forward/

Edited June 30, 2014 by capcc76

[capcc76]

Banking, mortgage brokers and security industry is extremely regulated since 2008, almost harshly. I agree they brought this on themselves due to the few bad apples exploiting the system.

The part that absolutely astonishes me is how the Bush administration was either ignorant or just a sleep at the wheel. Most everyone in the financial industry and insurance industry say this coming for several years and the administration did nothing, absolutely nothing to stop it.

We knew AIG was in trouble and losing liquidity in 2004/2005. This was bleeding over into CNA and other large insurers in reinsurance market because of about $450 mil in CDS protection that AIG could not cover. There was something like $70 trillion CDS floating around worldwide.

Banks all over the world had purchased protection for CDS from AIG and failure of AIG could have brought down the entire WORLD financial and banking industry. This was not just a US problem.

What was Bush administration doing or thinking? We has whistleblowers and insiders telling everyone that would listen that AIG, CDS and CMOs were tanking. No one did anything and the CMO, CDS and credit swap market increased exponentially between 2005 and late 2007 and now we had huge amounts of Americans with their retirement and pension funds being placed into funds with large allocations to CMOs, CDS and CDOs.

Move forward to 2007. We all knew in 2007 what was going to happen and friends of mine even called the Quarter in which it would happen. Most us went 70% to 100%, got out of any funds with CDO or CMOs in the portfolio and ran like hell from financial securities.

Again, this was no secret. Everyone with any sense knew wheels would eventually come off in 2005/2006 and suspected it as early as 2004. Everyone except those that could have actually done something to stop the progression in our government.

That being said, our banking industry is currently very sound. No reason for alarm. The lesson learned is don't get greedy. We all where. I had investments and real estate appreciating 25% per quarter in 2004/2005. I suppose some just thought this would never stop and administration was too busy patting itself on the back and taking credit for wealth expansion in 2002-2007.

" That being said, our banking industry is currently very sound."

Rubbish! Even George Soros said the US banking system is " effectively insolvent "

" Banking, mortgage brokers and security industry is extremely regulated since 2008, almost harshly."

The $700 trillion derivatives market is not regulated at all and Alan Greenspan, even refuses to explain why he even fought tooth and nail to keep it that way

LOl, who can argue with a man that reads and listens to dailyjodcuts.com, zerohedge and George Soros! Love it!

George Soros is a rich and controversial guys with ulterior motives. Does he not want American banking to fail and become dependent upon international groups. Does he not want more power for the World Bank and IMF. Understanding him and his motives may shed some light on what he says. Did he not become rich through manipulating currency to the detriments of regular folks. Did Thailand refer to him as an economic criminal. Did Malaysia make some pretty strong statements about his currency activities during the 1997 Asian financial crisis?

There are some troubling aspects about derivative markets, but I am guessing you know very little about current derivatives and base your beliefs off what outlier websites focus on or perhaps take out of context.

By all means man, if it makes you feel warm and fuzzy . . . keep your money under your mattress or burry it tin cans like Cousin Eddie on Vegas Vacation. I suppose gold hoarders living in fear and worry want to see banking collapse. Keep wanting and wishing if it makes you happy, but you really should just enjoy life, stop worrying or you are going to be disappointed when everything does not go down the tubes and the world does not come to end.

Hahaha. Soros wants to put american banks under foreign influence.? Please stop watching fox news too much.

American banks have down so much toxic debt to the world, it wouldn't matter who owned them after they went bust. There wouldn't be a finwncial world worth owning.

That is your subjective opinion on US and world banking stability. Regarding Soros, one need only look at his actions and history as I noted, but you left out, and his statements. You will see what I mention has nothing to do with Fox News and everything to do with Soros. BTW, I vote dem and find the idiots on Fox News hilariously pathetic, but I am sickened by Obama.

Your last sentence is unclear and may perhaps be a Freudian slip. You are correct in that if US banks failed in the general sense, [t]here wouldn't be a financial world worth owning" as most of the world banks and economy would be taken down with the US collapse.

Soros seems to profit on chaos and financial system failure at expense of the middle class working man ala the examples I specifically referenced above.

Edited June 30, 2014 by capcc76

[Pakboong]

The banking sector has produced the lion's share of billionaires on the planet so I guess we had to bail them out at the prospect of them not getting a large enouh bonus. It is really hard to feel sorry for the banking establishment. They seem to do very little of what we the people actually need or want in relation to their compensation which is incredible. Perhaps it is an all or nothing situation with them but that is just too bad. They act as predators and we don't really need predators in that particular role.

unfortunately the predators are here to stay and we have to live with it.

So why blame the bank when the greedy consumer applied for loans, provided false information on loan documents private mortgage companies assisted in the deception and government fair housing entities are raising hell about fair lending practices and making sure minorities also live the American dream and buy a house.

Because it wasn't the greedy consumer who couldn't pay his liar loan that collapsed the system. It was the banks who packaged those loans into securities, the other banks that packaged those security products into un-understandable derivative products worth many times what the actual underlying mortgages were worth, and the insurance companies that wrote insurance basically guarantying they couldn't actually cover their obligations if those derivative products did lose value.

Had it just been the collapse in the real estate market prices, we'd have been in the clear by 2009-1/2.

But flash forward to 2014, and the poor liars who had the loans are screwed, along with everyone whose home lost value- most of them just hard working people with their life savings tied up in their simple dream of owning a home. And the banks are now carrying over $700 Trillion of those same dodgy derivative products. Or, I should say, the public is exposed to over $700 Trillion of those derivative products, because the banks can't cover their bets. And if the price of oil goes up, or there's a bad harvest in Sri Lanka, or copper goes down, or God only knows what unforeseeable trigger, the system will collapse again. Because nobody understands what's wrapped up in those $700 Trillion of derivatives. They don't care about risking the life savings and retirements of billions of people, as long as they're getting richer.

Vetting loan applicants is pretty much all the banks do that the rest of us really need. We should never be on the hook for risky loans. Yes banking is a business, even the IMF is a business and one that pays its shareholders very well. What exactly is it we need them to do for the crazy compensation they actually expect with no downside to themselves.

[Pakboong]

Some people amaze me. They have no grasp of what the US is, how much wealth it has, or just how big it is.

The US government has untapped assets that are mind boggling. It has 88,000 miles of saltwater shoreline, a lot of it containing gas and oil. Everyone knows how big Texas is, but Alaska is more than twice as big. In fact Alaska is bigger than the next three states combined - Texas, California and Montana. Alaska is dripping rich in natural resources.

The US government owns 28% of all the land in the US, and much of it the most asset rich land. Vast forests of marketable timber, huge deposits of coal, gas, oil, rare earth minerals, gold, silver...

And yet 72% of it belongs to private parties who make money in all of the above plus farming. There is a vast amount of farm land. There are large rivers with enough fall to generate almost all of the electricity for the West, and enough to even export some to the East. All of the rivers belong to states or the federal government.

The US for a long time has decided not to tap its resources. But if it needed money...

I could go on, but for those who'd like to ring the death knell for the US, you have a very long time to wait.

Your country may have all these assets in the ground which you have referred to many times before in other threads but simultaneously your country evidently has a a very fragile social system with deep-seated problems. You may have those assets but your country is so economically fragile that the slightest hickup leads to complete breakdown and lawlessness as you saw in hurricane katrina and hurricane sandy.

I mean if people are so desperate that they behave like this just to save a few dollars on a consumer item, imagine how they will behave in a real countrywide crisis with 47% owning a gun?

Are you aware of where that happened and what the demographics are? I wouldn't wander into that area in the best of times. It is downright frightening even to me.

I was going through that area on the freeway one night. I needed gas and stopped in Slidell. While I was pumping my gas some guys with apparently nothing better to do began to walk around my car and eye me. I was very, very thankful to get out of there without a confrontation.

Just drive into New Orleans any time from the freeway (I-10.) You go through an older section of town first that has become a ghetto. You'll see lazy axxed groups of guys just hanging out, sitting on the steps of houses, and living in a dump that they created. Most likely they have a girlfriend with illegitimate children, collecting government benefits and supporting them.

The are certain areas in even Canada (parts of Vancouver) or Australia or London where I wouldn't go in broad daylight at any time.

There's a very unfair perception that because a few spots in America are dangerous, that it's all dangerous and that's far from the truth.

We pay those people off so they leave us alone and of course, remain isolated in the ruined inner city., The money they get is nothing when compared to the compensation we pay in interest to the Federal Reserve Bank. The best part of this is that "The Fed" is tax exempt. They take in nearly half a trillion in interest each year.

Edited June 30, 2014 by Scott

[capcc76]

unfortunately the predators are here to stay and we have to live with it.

So why blame the bank when the greedy consumer applied for loans, provided false information on loan documents private mortgage companies assisted in the deception and government fair housing entities are raising hell about fair lending practices and making sure minorities also live the American dream and buy a house.

Because it wasn't the greedy consumer who couldn't pay his liar loan that collapsed the system. It was the banks who packaged those loans into securities, the other banks that packaged those security products into un-understandable derivative products worth many times what the actual underlying mortgages were worth, and the insurance companies that wrote insurance basically guarantying they couldn't actually cover their obligations if those derivative products did lose value.

Had it just been the collapse in the real estate market prices, we'd have been in the clear by 2009-1/2.

But flash forward to 2014, and the poor liars who had the loans are screwed, along with everyone whose home lost value- most of them just hard working people with their life savings tied up in their simple dream of owning a home. And the banks are now carrying over $700 Trillion of those same dodgy derivative products. Or, I should say, the public is exposed to over $700 Trillion of those derivative products, because the banks can't cover their bets. And if the price of oil goes up, or there's a bad harvest in Sri Lanka, or copper goes down, or God only knows what unforeseeable trigger, the system will collapse again. Because nobody understands what's wrapped up in those $700 Trillion of derivatives. They don't care about risking the life savings and retirements of billions of people, as long as they're getting richer.

Vetting loan applicants is pretty much all the banks do that the rest of us really need. We should never be on the hook for risky loans. Yes banking is a business, even the IMF is a business and one that pays its shareholders very well. What exactly is it we need them to do for the crazy compensation they actually expect with no downside to themselves.

The pre-2008 problem was heavily weighted on loans processed by mortgage companies who then sold the processed loans "upstream" to banks. Mortgage company practices were candidly shocking and I worked on many cases where buyer's agents and appraisers were criminally prosecuted and put into jail.

Common example: house on market for $100k; marginal applicant with no liquidity looks to buy as a starter home or entry level home for low income or minority; buyer's agent structures deal at $120k with homeowner to take back a fictitious 2nd that is never intended to be repaid; appraiser appraises at an inflated $120k, mortgage company processes and gets loan amount of $100k from lending institution upon representation that house is worth $120k and buyer putting $20k down.

This results in an under secured and risky loan to someone that could not even afford a down payment. These loans were sold upstream to Country Wide at an alarming rate. BofA acquired Country Wide and the under secured paper processed and extended through criminal acts of others at the granular level.

This is just one example of many practices that all but lead to the demise of independent mortgage companies in the lending structure.

Edited June 30, 2014 by capcc76

[Pakboong]

You are correct as to your view of the process. I am saying that vetting loan applicants is pretty much all banks do and they failed miserably. I should never have to hear about it. We pay those people fortunes to evaluate risk. We have no time or interest in doing the bank's job for them. The other stuff that banks do is pretty much bean counting but I expect them to count the beans correctly for the amount of compensation they make. Again, I don't need to hear about their problems, I have problems of my own. All of us here are paying fees to our central and personal banks and I think it is reasonable to expect them to do a very good job. Economists from Ivy league schools start at around $300,000 a year in salary. They shouldn't need any help from us.

The fact that money is loaned in existence make the vetting process very difficult because you have to make loans. The bankers have to balance the risk to their advantage. Most of them do a good job until government gives them the impression that what they do doesn't matter as the taxpayer will guarantee all loans. This is particularly bad with student loans. Bankers were dumping bad loans back on government at an alarming rate. Govenment has to become a collection agency to protect public interst.

Edited June 30, 2014 by Pakboong

[midas]

Some people amaze me. They have no grasp of what the US is, how much wealth it has, or just how big it is.

The US government has untapped assets that are mind boggling. It has 88,000 miles of saltwater shoreline, a lot of it containing gas and oil. Everyone knows how big Texas is, but Alaska is more than twice as big. In fact Alaska is bigger than the next three states combined - Texas, California and Montana. Alaska is dripping rich in natural resources.

The US government owns 28% of all the land in the US, and much of it the most asset rich land. Vast forests of marketable timber, huge deposits of coal, gas, oil, rare earth minerals, gold, silver...

And yet 72% of it belongs to private parties who make money in all of the above plus farming. There is a vast amount of farm land. There are large rivers with enough fall to generate almost all of the electricity for the West, and enough to even export some to the East. All of the rivers belong to states or the federal government.

The US for a long time has decided not to tap its resources. But if it needed money...

I could go on, but for those who'd like to ring the death knell for the US, you have a very long time to wait.

Your country may have all these assets in the ground which you have referred to many times before in other threads but simultaneously your country evidently has a a very fragile social system with deep-seated problems. You may have those assets but your country is so economically fragile that the slightest hickup leads to complete breakdown and lawlessness as you saw in hurricane katrina and hurricane sandy.

I mean if people are so desperate that they behave like this just to save a few dollars on a consumer item, imagine how they will behave in a real countrywide crisis with 47% owning a gun?

Are you aware of where that happened and what the demographics are? I wouldn't wander into that area in the best of times. It is downright frightening even to me.

I was going through that area on the freeway one night. I needed gas and stopped in Slidell. While I was pumping my gas some guys with apparently nothing better to do began to walk around my car and eye me. I was very, very thankful to get out of there without a confrontation.

Just drive into New Orleans any time from the freeway (I-10.) You go through an older section of town first that has become a ghetto. You'll see lazy axxed groups of guys just hanging out, sitting on the steps of houses, and living in a dump that they created. Most likely they have a girlfriend with illegitimate children, collecting government benefits and supporting them.

The are certain areas in even Canada (parts of Vancouver) or Australia or London where I wouldn't go in broad daylight at any time.

There's a very unfair perception that because a few spots in America are dangerous, that it's all dangerous and that's far from the truth.

So you're saying this kind of behaviour is only attributable to certain locations?

So do you include Louisiana because you will recall when the federal EBT food stamp system suffered a critical failure last October EBT card holders there ransacked Wal-Mart stores, stuffing their shopping carts full of groceries and "paying" for them with near-empty EBT cards.

The point is, instead of the hard-working entrepreneurial society America used to be, it has has turned into an entitlement society and one in which a huge number of people are only concerned with how much they can get away with even if it means stealing it. And it's not just these guys in the supermarket, I'm also including white-collar thieves like Bernie Madoff and Jon Corzine.

[F430murci]

U.S. GDP Grew 4% In The Second Quarter 2014

On Wednesday, the Bureau of Economic Analysis released its advance estimate of real gross domestic product for the second quarter of 2014 covering April, May and June of this year. The release showed output in the U.S. increasing at an annual rate of 4%. This is relative to the first quarter when real GDP declined 2.1% (an improvement from a previous estimate which showed a 2.9% decline).

http://www.forbes.com/sites/samanthasharf/2014/07/30/u-s-gdp-grew-4-in-the-second-quarter-2014/

[midas]

U.S. GDP Grew 4% In The Second Quarter 2014

On Wednesday, the Bureau of Economic Analysis released its advance estimate of real gross domestic product for the second quarter of 2014 covering April, May and June of this year. The release showed output in the U.S. increasing at an annual rate of 4%. This is relative to the first quarter when real GDP declined 2.1% (an improvement from a previous estimate which showed a 2.9% decline).

http://www.forbes.com/sites/samanthasharf/2014/07/30/u-s-gdp-grew-4-in-the-second-quarter-2014/

 

 

But this this is just  "hollow growth".  producers pulling demand from the future courtesy of cheap credit and assuming that the inventory will be sold off in the ordinary course of business without bottom-line slamming liquidations.

The problem with inventory hoarding, however, is that at some point it will have to be unhoarded.