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223 comments on DrumBeat: February 29, 2008

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River on February 29, 2008 - 10:21am Permalink | Subthread | Parent | Comments top

Some are getting out of 'Surburban Dodge' while some are doggedly trying to hold onto the 'ol homestead by tapping their retirement 401K accounts. It seems the nesting instinct is very strong among some, so strong that they are literally mortaging their future retirement to remain in a home where they are upside down on the mortgage. Leads me to believe that all humans are not smarter than yeast...

http://www.atimes.com/atimes/Global_Economy/JC01Dj01.html

"More People Tap 401(k) Accounts for Cash."

'It seems, according to his AP article, that an outfit called Great-West Retirement Services has noticed that more people are taking money prematurely out of their retirement accounts, and that, "hardship withdrawals jumped 14% last year, and the number of loans rose almost 13%, with a dramatic increase occurring in the fourth quarter." '

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Leanan on February 29, 2008 - 10:26am Permalink | Subthread | Parent | Comments top

Couple of economy-related links...

More Americans using credit cards to stay afloat

Seven years in the credit-counseling business didn't prepare Ann Estes for the alarming trend she began noticing last fall: As her clients' mortgage bills became unaffordable, a growing number of them began paying their credit card bills before — and sometimes instead of — their mortgages.

"We've never seen anything like this," says Estes, who counsels clients by phone from her office in Richmond, Va. "Their homes are at risk, and they know it. But people say, 'I don't want to let my credit cards go because that's my cash flow.' "

Why Surprises Still Lurk After Enron

Surprises multiplied as the subprime problem of 2007 grew into the credit disruption of 2008. It is one thing to have a bank report losses because some of the loans on its balance sheet went bad. That is part of the business of banking. It is something else, however, for a bank to report a multibillion-dollar loss from taking some risk that had never been mentioned in its financial statements.

Haven’t we seen this movie before, involving a company called Enron? Didn’t Congress pass a law requiring that the problem of off-balance-sheet mysteries be solved?

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mcgowanmc on February 29, 2008 - 11:27am Permalink | Subthread | Parent | Comments top

"Didn’t Congress pass a law requiring that the problem of off-balance-sheet mysteries be solved?"

No. They didn't.

There never was an investigation into the special purpose funds, now called VIE's.

And VIE's have been how Goldman and most likely JPM (They invented VIE's for Enron and have over twice the derivatives of Citi) have kept their books simmering on the oven.

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Leanan on February 29, 2008 - 11:41am Permalink | Subthread | Parent | Comments top

UBS sees writedowns hitting $600 billion

The toll of the mortgage mess keeps rising. Analysts at UBS (UBS) said Friday they expect financial firms worldwide to take writedowns totaling $600 billion in the wake of the breakdown of debt markets that started in June.

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Noizette on February 29, 2008 - 1:15pm Permalink | Subthread | Parent | Comments top

(from Switz.) The UBS shareholding meeting took place. 52 small shareholders slotted for speaking time. It was a huge jamboree, with special trains scheduled well before dawn from the big cities. People came armed with chocolate (a national symbol) and croissants, as the UBS is famed for its stingy sandwiches.

Shouting matches shrilled or boomed, invective flew. Finally, though, there was no way out and the UBS will be recapitalized by Singapore sovereign funds, an ‘arab state investor’ (no details from me, as the published facts are unclear and not important anyway.) In this way, it can avoid the ultimate bank review.

Ospel (google, his first name is Marcel) will remain the director for a year at least - experience and contacts over the new broom that sweeps clean!

I bank there. Heh. Saying more would be indelicate.

I post local stories because I appreciate them so much from others.

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Leanan on February 29, 2008 - 1:33pm Permalink | Subthread | Parent | Comments top

Faced with mortgage default, some U.S. homeowners walk out

Then in January he learned about a new company in San Diego called You Walk Away that does just what its name says. For $995, it helps people walk away from their homes, ceding them to the banks in foreclosure.

Last week he moved into a three-bedroom rental home for $1,200 a month, less than half the cost of his mortgage. The old house is now the lender's problem. "They took the negativity out of my life," Zulueta said of You Walk Away. "I was stressing over nothing."

You Walk Away is a small sign of broad changes in the way many Americans look at housing. In an era in which new types of loans allowed many home buyers to move in with little or no down payment, and to cash out any equity by refinancing, the meaning of homeownership and foreclosure has changed, economists and housing experts say.

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davebygolly on February 29, 2008 - 1:43pm Permalink | Subthread | Parent | Comments top

Trouble is, depending on what the 401k is invested in, in some cases people may (unknowingly) be doing the right thing "walking away from their 401k"! One does not know what is going to be exempted from the tsunami of asset devaluations.

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