Massive WACHOVIA BANK of North Carolina lost GINORMOUS $ last year

[RUSH LIMBAUGH is my clone!]

I just heard on the news on radio. a staggering sum. I have no details yet. Gotta be stories on this to google up.

[royalfan5]

I want to say it was 8.6B for the quarter. It was pretty much expected. I checked and it was 8.86B for the second q.

[yermom]

it breaks my heart to hear that

[SoonerStormchaser]

So that's who you were talking about Mike!

[Whet]

From the Charlotte Observer:


Wachovia reports huge loss, will cut 10,750 jobs

CHRISTINA REXRODE and RICK ROTHACKER

Wachovia Corp. announced a whopping second quarter loss of $8.9 billion this morning, with plans to shake up its mortgage unit, slash its dividend payout to shareholders, and cut thousands of jobs.
Chief executive Bob Steel, hired less than two weeks ago to bring the struggling bank back to its former glory, had hinted that he envisioned a smaller, leaner Wachovia. Today, in his first earnings announcement, he kept his word, announcing numerous other plans to preserve capital.
Wachovia also said its new headquarters construction continues on schedule. However, the bank said it may seek partners for a 46-story condo planned on the arts and cultural campus in uptown Charlotte.
“That office tower is going up as we speak,” Tom Wurtz, Wachovia’s chief financial officer, said of the bank's new uptown headquarters. “No change in schedule for the office tower.”
As for the planned 46-story condo, he said it is “of great interest to us.” However, Wachovia might pursue the condo project with a partner. He did not provide further details.
At midday, the stock market was reacting well, with Wachovia trading at $14.18 a share, up about 7.5% from Monday's close.
As reported in today’s Observer, Wachovia announced this morning that it plans to cease making mortgages through third-party brokers. At the end of the first quarter, about 30 percent of the bank’s mortgage loans were made through third-party brokers. As recently as last month, the bank said it remained committed to using those brokers, especially in areas where it doesn’t have brokers.
But in a memo to employees yesterday, Tim Wilson, the head of loan origination for Wachovia Mortgage, wrote: “Going forward, we will primarily focus on customers who have relationships with the bank, and who are located in geographies where Wachovia branches are located.”
The change in strategy is part of a larger plan to rein in mortgage losses, which have been on the rise since Wachovia’s $24 billion purchase of Golden West Financial Corp., a troubled California mortgage lender, in 2006. The so-called Pick-a-Payment loans, which Wachovia inherited from Golden West, have proved a headache for the bank and a lightning rod for shareholders, defaulting at higher rates than other mortgages.
In April, the bank tightened underwriting standards, and last month, it stopped offering the “negative amortization” option for Pick-a-Pay loans, which let the borrower pay less than the interest owed. Those loans are criticized by consumer advocates because their balance can increase instead of decrease. Wachovia has also said that it will help customers with Pick-a-Pay mortgages refinance into traditional mortgages.
As part of today’s announcement, Wachovia stepped up that effort, saying that about 1,000 employees in mortgage lending will be redeployed to help customers refinance and restructure Pick-a-Pay loans.
CEO Steel, a veteran of the U.S. Treasury and Goldman Sachs, has been on the job since July 10. Former CEO Ken Thompson was asked to retire June 1, taking the fall for the Golden West deal, though board members had signed off on it.
Things have gone from bad to worse for Wachovia in the past year. In the first quarter, the bank recorded its first trip into the red since 2001. But that was minuscule compared to today’s second-quarter loss, which is about 12 times as large.
The bank’s $8.9 billion loss in the second quarter represents a loss of $4.20 per share. A year ago, the bank earned $2.3 billion, or $1.22 per share.
“These bottom-line results are disappointing and unacceptable,” said Lanty Smith, the board chairman. “While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility.”
On a conference call with analysts on July 10, Smith said the board acknowledged “that Golden West was a mistake and that we have to deal with the consequences of it.”
Like many of its peers, Wachovia also struggled in corporate and investment banking, which offers Wall Street-style services such as stock and bond offerings. Earnings there fell 73 percent, to $209 million.
Wachovia’s shares have fallen precipitously in the past 12 months ago, closing at $13.18 yesterday. A year ago, they were $49.98.
Also this morning, Wachovia announced additional plans to shore up another $5 billion in capital, including reducing expense growth and capital expenditures, repositioning the CD book and generating growth in low-cost core deposits. The company is also taking steps to reduce the number of credit-only commercial borrowers and to sell certain assets.
Wachovia also said it will cut 10,750 positions.
The bank’s second-quarter loss includes a $6.1 billion noncash accounting charge, which has no impact on tangible capital levels, regulatory capital ratios or liquidity. Analysts had predicted that the charge, called a goodwill impairment charge, was largely related to Golden West.
But Wachovia said that about $3.5 billion of the goodwill impairment charge came from the coporate and investment bank, while the rest came from the commercial area of the general bank. The impairment was driven by the sharp decrease in the bank’s stock price and market value. The bank said it did not take an impairment charge in the retail part of the general bank, where the Golden West mortgage portfolio resides, because of the value of its retail branches. Wachovia noted continued strength in its traditional bank, with growth over the year in revenue, interest income, fee income and loans.

[JohnnyMack]

At least Rush got the name of the bank right.

[Sooner_Havok]

Hooray, now hurry fellow tax payers, these banks need our tax dollars to be bailed out!

[Animal Mother]

I have a buddy that worked for A.G. Edwards when Wachovia bought them out last year. He now works for Wachovia and has sent me some emails about the shenanigans. Auditors from around the region were at his location (St. Louis) last week and then this comes up in North Cackalacky. How far will their stock sink?
My buddy emailed me this from St Louis Dispatch, if I remember correctly.

Missouri, Illinois inspectors conduct raid at Wachovia Securities

STAFF REPORTS
07/17/2008

Securities regulators from Missouri and Illinois conducted a special inspection this morning at Wachovia Securities headquarters in St. Louis, according to Missouri Secretary of State Robin Carnahan.

The inspectors were looking for information concerning Wachovia Securities' sales practices, internal evaluations of the auction rate securities market and marketing strategies.

Carnahan's office also has served subpoenas on over a dozen Wachovia Securities agents and executives to gather more information.

More than 70 formal complaints on auction rate securities were filed with the Missouri Securities Division over the last four months, representing over $40 million of frozen investments, Carnahan's office said in a statement.

In April, the securities division launched a full-scale investigation, requesting documents, e-mails, transcripts and other records from Wachovia Securities and other banks. Wachovia Securities has not fully complied with these requests, prompting today's onsite inspection.

Inspectors from Massachusetts, New Jersey, Pennsylvania and other states also were at Wachovia's offices this morning.

"Hundreds of Missouri investors have called my office because of inability to access their money. They were told these investments were safe and easy to cash in, but now they cannot run their business, make medical payments, or pay school tuition," Carnahan said in a statement. "Our office is doing all we can to find solutions that will make these investors whole."

[Sooner_Havok]

http://i63.photobucket.com/albums/h152/havok0283/0717davies.jpg

[PhilTLL]

clipped cartoon

Heh! Capitalism in the new millennium: privatize the profits, socialize the risks and failures. USA! USA!

[RUSH LIMBAUGH is my clone!]

Heh! Capitalism in the new millennium: privatize the profits, socialize the risks and failures. USA! USA!This is the new Socialized Capitalism. The Amierican taxpaying public is responsible for propping up all people's mortgages who can't or won't pay. The underlying principle is that no lending institutions should be allowed to go bankrupt.

[Frozen Sooner]

So that's who you were talking about Mike!

Nope.

The information I was given may turn out to be not accurate.

[Chuck Bao]

This is the new Socialized Capitalism. The Amierican taxpaying public is responsible for propping up all people's mortgages who can't or won't pay. The underlying principle is that no lending institutions should be allowed to go bankrupt.

This is nothing new and certainly not a new socialized capitalism. No lending institution should be allowed to go bankrupt and depositors lose their money. These banks will be taken over or nationalized. The key thing that you left out, RLIMC, is that shareholders of these banks will lose everything, as it should be.

The jury is still out on giving some federally mandated relief to home buyers is the right approach. I think the main intent is to stop home prices from falling further and, in effect, creating more bank failures, instead of rewarding those who have bitten off more than they can chew.

We are still in a financial crisis, despite the strange liquidity driven daily Wall Street meanderings. At least, that is what I'm telling my clients.

Animal Mother's post is really, really disturbing. The SEC is apparently already all over that and that is never, ever a good sign. Spec for posting that, AM. Please post other local news items on this.

Spec for Havok and PhilTLL. I think I missed that day in business school.

I regret that, because in reality you'd get the chance to be a millionaire banker on the upside or a prison inmate with a still really nice house on the downside. The alternative is what? A low paying salary?

In my opinion, they need to make these people really pay.

[tommieharris91]

I'm not a big fan of using my taxes to bail out banks. I think it should go towards supporting people who get in car wrecks and start drawing Social Security at 23 becuase they are too depressed to go to work.

/me buys tanked shares of Wachovia

[Frozen Sooner]

I'm not a big fan of using my taxes to bail out banks. I think it should go towards supporting people who get in car wrecks and start drawing Social Security at 23 becuase they are too depressed to go to work.

/me buys tanked shares of Wachovia

The federal government has a contractual obligation to pay depositors' accounts up to $100,000, which is the vast majority of accounts.

These funds come from the FDIF and NCUSIF, which are both funded by premiums charged to banks and credit unions.

Just sayin'.

[Sooner_Havok]

I have an idea, but it probably sucks.

Lets say that Bank X is going to go under. Fed decides to bail it out by giving it Y billions of dollars.

Why not let bank X die like it should, and give the Y billions to the people who had money tied up in the bank and tell them, go to another bank please, this one is no longer open.

[tommieharris91]

I have an idea, but it probably sucks.

Lets say that Bank X is going to go under. Fed decides to bail it out by giving it Y billions of dollars.

Why not let bank X die like it should, and give the Y billions to the people who had money tied up in the bank and tell them, go to another bank please, this one is no longer open.

This is basically what England when one of its major banks failed.

[tommieharris91]

The federal government has a contractual obligation to pay depositors' accounts up to $100,000, which is the vast majority of accounts.

These funds come from the FDIF and NCUSIF, which are both funded by premiums charged to banks and credit unions.

Just sayin'.

I would say as of last week a lot of financial stocks had nowhere to go but up because they were valued so low. I wouldn't expect a dividend from them anytime soon.

Just sayin'.

[Chuck Bao]

I have an idea, but it probably sucks.

Lets say that Bank X is going to go under. Fed decides to bail it out by giving it Y billions of dollars.

Why not let bank X die like it should, and give the Y billions to the people who had money tied up in the bank and tell them, go to another bank please, this one is no longer open.

In my opinion, that would suck. The bank still has some economic value after the Fed guarantees the deposits and injects sufficient capital. Previous shareholders still have a very small stake left even though their shares have probably been diluted to next to nothing. The Fed can still sell it off back to the private sector to recoup some of its money. Besides, some of the employees would still get to keep their jobs.

[Frozen Sooner]

I would say as of last week a lot of financial stocks had nowhere to go but up because they were valued so low. I wouldn't expect a dividend from them anytime soon.

Just sayin'.

I would agree with that.

Well, except for us. We're kicking out monthly dividends to our shareholders.

[Sooner_Havok]

In my opinion, that would suck. The bank still has some economic value after the Fed guarantees the deposits and injects sufficient capital. Previous shareholders still have a very small stake left even though their shares have probably been diluted to next to nothing. The Fed can still sell it off back to the private sector to recoup some of its money. Besides, some of the employees would still get to keep their jobs.

But the banks that made these bad decisions just keep to keep on keeping on. They need to be help accountable for their failures, not the US tax payers.

In the end however, it is the US taxpayer that does get stuck with the bill, so why not at least destroy the financial institutions that screwed up in the first place?

[olevetonahill]

I have an idea, but it probably sucks.

Lets say that Bank X is going to go under. Fed decides to bail it out by giving it Y billions of dollars.

Why not let bank X die like it should, and give the Y billions to the people who had money tied up in the bank and tell them, go to another bank please, this one is no longer open.

Ok I aint a Rhodes scholar type when it comes to this Kinda Carp
But After the Fed Bails out the depositors they still have to try to collect the debts Owed to the said bank
just sayin

[Sooner_Havok]

Ok I aint a Rhodes scholar type when it comes to this Kinda Carp
But After the Fed Bails out the depositors they still have to try to collect the debts Owed to the said bank
just sayin

Right, so the fed buys up all the outstanding debt, and then sells it off to other banks. Leaving the dip**** banks holding nothing. At that point, who cares if the collapse?

[Chuck Bao]

I would say as of last week a lot of financial stocks had nowhere to go but up because they were valued so low. I wouldn't expect a dividend from them anytime soon.

Just sayin'.

I said the same thing in Thailand way back in March 1997. Oh, that was just before US hedge funds attacked the baht and the IMF forced Thailand to float the baht guaranteeing profits to the hedge funds and leaving Thailand with all but two Thai banks surviving without state assistance.

That sparked the Asian economic crisis the following year, which sent all regional currencies down. That was so stupid because it was pointless, wiped out huge amount of national wealth and yeah stupid because the fundamentals for the region were really quite strong.

It took five years for us to recover and that was through a touch-and-go period for the banks, even for the nationalized and then privatized ones. They had to raise capital again and again and it was a process that continually diluted shareholders value.

Going back to the current US situation, my point is that this crisis is far from over and it will take several years for the housing market in the US to recover and the financial situation will not recover until the housing market does. So, I think that buying financial stocks would be a brave thing to do.

[olevetonahill]

Right, so the fed buys up all the outstanding debt, and then sells it off to other banks. Leaving the dip**** banks holding nothing. At that point, who cares if the collapse?

Nope bro
I had a 10K loan at a bank that The VP and I had agreed to put On a Payment thing after 6 months
Said Bank folded at 5 months No warning to me
I had to make arraingements with the Feds to Pay it off
And I did to FDIC
Just sayin

[tommieharris91]

I said the same thing in Thailand way back in March 1997. Oh, that was just before US hedge funds attacked the baht and the IMF forced Thailand to float the baht guaranteeing profits to the hedge funds and leaving Thailand with all but two Thai banks surviving without state assistance.

That sparked the Asian economic crisis the following year, which sent all regional currencies down. That was so stupid because it was pointless, wiped out huge amount of national wealth and yeah stupid because the fundamentals for the region were really quite strong.

It took five years for us to recover and that was through a touch-and-go period for the banks, even for the nationalized and then privatized ones. They had to raise capital again and again and it was a process that continually diluted shareholders value.

Going back to the current US situation, my point is that this crisis is far from over and it will take several years for the housing market in the US to recover and the financial situation will not recover until the housing market does. So, I think that buying financial stocks would be a brave thing to do.

I read today that it would take 2.5 years for existing houses in the US to be filled if no new houses started building today (or something like that). So this really could take awhile. But hey, I'm young. I can afford to take some risks. I just don't feel like I should heavily weight my portfolio with financial stocks right now, though. I don't think it's worth that much risk, because they will rise, and then tank again.

[Chuck Bao]

On second thought, there probably are some good buying opportunities in financials. But you have to correctly analyze their financial position.

If you are buying bank shares, pay attention to price/book value. Book value is shareholders equity per share.

I typically tell new analysts that bank financial statements are the easiest and, at the same time, most difficult to analyze because we really can't fully access information on the quality of their assets.

Banks' assets (primarily loans) and liabilities (primarily deposits plus interbank loans, debentures and other borrowings) are at face value and that is cash. If assets and liabilities are appropriately valued, then shareholders equity is the value of the bank.

The question then is if the loans (assets) can be collected and are appropriately valued on the bank's books.

Actually, I like to add loan loss reserve to shareholders equity because this is money already set aside in the event that some of the loans (assets) cannot be collected.

So, if a bank is trading far below price/book value of 1.00x and has sufficent loan loss reserve to cover potential mortgage defaults, then I think it would be a great trading opportunity.

[olevetonahill]

Oh man Chuck
If we Talk Money when you get Home are we gonna be in trouble ?:eek:

[Chuck Bao]

But the banks that made these bad decisions just keep to keep on keeping on. They need to be help accountable for their failures, not the US tax payers.

In the end however, it is the US taxpayer that does get stuck with the bill, so why not at least destroy the financial institutions that screwed up in the first place?

I don't think that way.

I think if the executives who made the bad decisions are gone, what would it matter if the name lives on?

Maybe, I'm too old school. I remember a time in Oklahoma before branch banking that local banks were locally owned and operated.

I worked for one of these locally owned and operated banks from high school and through my university studies. I was in bookkeeping when that meant counting checks to fill out bank statements. I operated one of those old sorting machines that encoded each incoming check and deposit slip. I even posted on one of the old posting machines that recorded the banks daily balance sheet and income statement. I operated teller and loan teller windows.

We were part of a big crew back then and those women gave me an education that I'd never get in a university.

The thing was that women in small towns in Oklahoma had two major occupations - either teach or work at the local bank.

The bank has since been taken over and the parent company taken over and I don't know who owns them now.

Bookkeeper there is now non-existent. It is done in OKC or elsewhere.

I think I'm writing this all to say that bank employees shouldn't be discarded with the bank.

[StoopTroup]

I guess I'm not gonna see many of those Wac Commercials this year.

Man am I gonna miss those.

[Okla-homey]

These funds come from the FDIF and NCUSIF, which are both funded by premiums charged to banks and credit unions.

Just sayin'.

sorta like state administered insurance guaranty pools to insure companies who write policies have the bucks to pay all claims. The companies who write policies in Oklahoma all kick money into the kitty to cover a company that ends up insolvent or undercapitalized.

Maybe we oughtta try that with lenders and keep tax dollars out of it. hmmm?

[Sooner_Havok]

I guess I'm not gonna see many of those Wac Commercials this year.

Man am I gonna miss those.

Maybe the banker guys could get a second chance, like the pets.com puppet thing

[Chuck Bao]

Oh man Chuck
If we Talk Money when you get Home are we gonna be in trouble ?:eek:


WHEN, not if, we talk, it is not going to be 'bout politics or money. And, I certainly wouldn't want to waste very good drunky town conversation about some of the low lifes on SF.com.

Shadow Thai kickboxing is a good and fun thing to do. But so you know that shadow kicks my *** every time.

[Sooner_Havok]

Are there nachos in here?

[Frozen Sooner]

sorta like state administered insurance guaranty pools to insure companies who write policies have the bucks to pay all claims. The companies who write policies in Oklahoma all kick money into the kitty to cover a company that ends up insolvent or undercapitalized.

Maybe we oughtta try that with lenders and keep tax dollars out of it. hmmm?

Yes, except the state guaranty funds aren't backed by the full faith and credit of the United States Government.

What if the lenders aren't part of the FDIC or NCUA, yet their collapse could lead to a depletion of the NCUSIF or FDIF by taking down a parent company insured institution?

[mdklatt]

those women gave me an education that I'd never get in a university

Bamp chicka wah wah.

[jkjsooner]

I just heard on the news on radio. a staggering sum. I have no details yet. Gotta be stories on this to google up.

When they bought Golden West I was like WTF? I just couldn't believe it. I can't believe guys making tens of millions of dollars per year could make such a boneheaded move.

Unfortunately they're the biggest client on the project I work on. If they went bankrupt it would be pretty shaky at my workplace. (Maybe it's a good sign as we're a lot more efficient than if they did this work themselves.)

[jkjsooner]

This is the new Socialized Capitalism. The Amierican taxpaying public is responsible for propping up all people's mortgages who can't or won't pay. The underlying principle is that no lending institutions should be allowed to go bankrupt.

But, but, they weren't supposed to pay the mortgage. The never-ending stream of house appreciation and refinancing was supposed to pay the mortgage. It's only fair....

[jkjsooner]

I think the main intent is to stop home prices from falling further and, in effect, creating more bank failures.

So a natural and predictable correction is such a bad thing?

We had 200% (or more) appreciation in many areas in just a few years driven by speculation and easy money. So now we have to prop up the market after a 15% fall? Even if we fell 33% we'd still be 100% above prices just a few years ago.

Chuck, I know you're in the financial industry so you must understand that even now houses are way out of line of what people can afford using any traditional standard/loan. You can't just wish that statistic away.

Do you want hyperinflation (and hope it comes with wage inflation) to bail out the housing market? Do you want your children and grandchildren to ever be able to afford a house of their own?

We can pay the price now or put it off and pay an even larger price in the future. If we prop up our housing market we will continue to misallocate resources to housing and enslave a whole generation.

I have zero sympathy for the serial refinancers who had no clue how to hold onto their good fortune (huge equity gains).

[jkjsooner]

The federal government has a contractual obligation to pay depositors' accounts up to $100,000, which is the vast majority of accounts.

These funds come from the FDIF and NCUSIF, which are both funded by premiums charged to banks and credit unions.

Just sayin'.

And that's not the same thing as bailing out a bank or those who irresposibly loaned the bank money or bought bad bonds.

We need to pay for misguided allocation of capital.

[jkjsooner]

I think if the executives who made the bad decisions are gone, what would it matter if the name lives on?

This brings up the biggest problem all of our industries have. Our CEO pay structure encourages excessive risk. If they can make a lot of money for a few years while taking excessive risks they become rich. Then when all heck breaks loose they just walk as multimillionaires (sometimes even getting a huge severance check) - essentially rewarding poor long term choices.

The Wachovia executives are doing well whether we bail them out or not.

[SoonerKnight]

This goes further then idiots that bought houses they could not afford. Here is what happened to me. I go to buy a house but the houses out here were really really expensive they start $300,000. So I look for something affordable and find a townhome in the $150,000 range. I buy said townhome as a first time buyer. Now houses are going for $185,000 new. :( And people are selling their townhomes for $114,000!!!! Hell, I'll never get out of that place. I am at least locked into a fixed %5.25 loan that is assumable but that is if someone qualifies for the loan. I can now afford a little more house but don't have a way to get rid of the house I am in. Now, I say let the execs rot in hell and the banks can go there with them. They made the bad loans and I should not have to pay for some idiots scheme of getting into a bigger house than they could afford. I did not know at the time back in 2004 that they were actually allowing people to fill in the blanks on their apps without verification. So anyone could have Bill Gate's type money on paper but be working at Wal-Mart! :( Seriously did we not pay attention to what happened in 1929? Loans people could not pay! Sheesh!!

[Chuck Bao]

So a natural and predictable correction is such a bad thing?

We had 200% (or more) appreciation in many areas in just a few years driven by speculation and easy money. So now we have to prop up the market after a 15% fall? Even if we fell 33% we'd still be 100% above prices just a few years ago.

Chuck, I know you're in the financial industry so you must understand that even now houses are way out of line of what people can afford using any traditional standard/loan. You can't just wish that statistic away.

Do you want hyperinflation (and hope it comes with wage inflation) to bail out the housing market? Do you want your children and grandchildren to ever be able to afford a house of their own?

We can pay the price now or put it off and pay an even larger price in the future. If we prop up our housing market we will continue to misallocate resources to housing and enslave a whole generation.

I have zero sympathy for the serial refinancers who had no clue how to hold onto their good fortune (huge equity gains).

Oh, I agree. I wasn't saying that a government sponsored bailout was right or useful. I was saying that the intent was to try to stop the further downward spiral of the property market, not as a handout to those making poor choices. But, you are right.

I still think that there is a lot of bad news to come out of the banks over the next several months.

[Okla-homey]

Yes, except the state guaranty funds aren't backed by the full faith and credit of the United States Government.

What if the lenders aren't part of the FDIC or NCUA, yet their collapse could lead to a depletion of the NCUSIF or FDIF by taking down a parent company insured institution?

But the only reason they are backed by the US is because Congress enacted a statute making it so. Congress can undo what it did if it were inclined. I'd like to see more responsibility placed in the collective laps of lenders. Thus, I'm open to the notion of scaling back federal insurance on depositors accounts linked to establishment of guaranty pools in each state.

IOW, you want to make a loan in Oklahoma. Fine, but you better be ready to put the equivalent of 2% of the principle loan amount in trust administered by the state that you will never ever see again. That way, if said lender gets in over his head, there is money available to cover the damage without charging us all for the boobitude.

Just a thought.

[Scott D]

This goes further then idiots that bought houses they could not afford. Here is what happened to me. I go to buy a house but the houses out here were really really expensive they start $300,000. So I look for something affordable and find a townhome in the $150,000 range. I buy said townhome as a first time buyer. Now houses are going for $185,000 new. :( And people are selling their townhomes for $114,000!!!! Hell, I'll never get out of that place. I am at least locked into a fixed %5.25 loan that is assumable but that is if someone qualifies for the loan. I can now afford a little more house but don't have a way to get rid of the house I am in. Now, I say let the execs rot in hell and the banks can go there with them. They made the bad loans and I should not have to pay for some idiots scheme of getting into a bigger house than they could afford. I did not know at the time back in 2004 that they were actually allowing people to fill in the blanks on their apps without verification. So anyone could have Bill Gate's type money on paper but be working at Wal-Mart! :( Seriously did we not pay attention to what happened in 1929? Loans people could not pay! Sheesh!!

While that aspect is true, it's also a widely held misconception that people intentionally buy "out of their range". In some cases, it's within people's ranges, but a variety of things can happen. Downsizing, Illness in the family, Natural Disaster that can affect their ability to pay a mortgage they can afford. The leeches in the system were the unscrupulous "lenders" who may or may not have been acquiring these "sub-prime" mortgages on the up and up, and pretty much skate away from the scenario with some cash in pocket, and no risk to themselves in the matter.

[jkjsooner]

This goes further then idiots that bought houses they could not afford. Here is what happened to me. I go to buy a house but the houses out here were really really expensive they start $300,000. So I look for something affordable and find a townhome in the $150,000 range. I buy said townhome as a first time buyer. Now houses are going for $185,000 new. :( And people are selling their townhomes for $114,000!!!!

Ever thought about renting? In many areas the monthly cost to rent an equivalent place is 1/2 or 1/3 the cost to own - if you actually are paying the full price to own not some teaser rate negative equity loan. That was a huge warning sign right there.

I know renting can be hard especially if you have kids you want the stability. But those who bought overpriced houses just made it that much harder for the prudent to be able to afford a house.

[Frozen Sooner]

But the only reason they are backed by the US is because Congress enacted a statute making it so. Congress can undo what it did if it were inclined. I'd like to see more responsibility placed in the collective laps of lenders. Thus, I'm open to the notion of scaling back federal insurance on depositors accounts linked to establishment of guaranty pools in each state.

IOW, you want to make a loan in Oklahoma. Fine, but you better be ready to put the equivalent of 2% of the principle loan amount in trust administered by the state that you will never ever see again. That way, if said lender gets in over his head, there is money available to cover the damage without charging us all for the boobitude.

Just a thought.

You're honestly advocating that the US Government default on their obligations?

Or are you saying that the feds should start scaling back from this date forward and pay any occurrences in the policy period?

[Hamhock]

[QUOTE=Scott D;2344296]While that aspect is true, it's also a widely held misconception that people intentionally buy "out of their range". In some cases, it's within people's ranges, but a variety of things can happen. Downsizing, Illness in the family, Natural Disaster that can affect their ability to pay a mortgage they can afford. QUOTE]

since there are so many things that CAN happen, people should plan for them.

[jkjsooner]

since there are so many things that CAN happen, people should plan for them.

Agree but you can't plan for everything. For example a 25 year old could get cancer and incur $300,000 in medical expenses that are not covered by insurance.

No matter how hard they planned for the unexpected, most 25 year olds couldn't handle that.

[Hamhock]

Agree but you can't plan for everything. For example a 25 year old could get cancer and incur $300,000 in medical expenses that are not covered by insurance.

No matter how hard they planned for the unexpected, most 25 year olds couldn't handle that.

agreed, but far fetched.

why didn't the health insurance cover the medical bills?

[shaun4411]

this is why im glad my bank (BOK) is owned by a billionaire oil tycoon that uses his BOK profits (or losses) to offset the tax burden of his other income.

[jkjsooner]

agreed, but far fetched.

why didn't the health insurance cover the medical bills?

I don't know. I just made it up. ;)

[Sooner_Havok]

agreed, but far fetched.

why didn't the health insurance cover the medical bills?

Does health insurance ever want to cover medical bills? Hell no. They want you to pay your premiums and STFU. Many make it clear "Make a claim against us, and we will drop your ***. Then you will have no health care."

[Hamhock]

Does health insurance ever want to cover medical bills? Hell no. They want you to pay your premiums and STFU. Many make it clear "Make a claim against us, and we will drop your ***. Then you will have no health care."

okie dokie.

i hope nobody ever tells my insurance company (or any I've ever had) that.

[Sooner_Havok]

okie dokie.

i hope nobody ever tells my insurance company (or any I've ever had) that.

Hey, I never said all. But fer ****'s sake, even I know they are in it to make money. If a kid gets cancer, and I have seen this on many different reports, insurance companies pull out the "We don't cover that type of cancer" or "At this time, we cannot cover this treatment" When you have a doctor saying "This treatment is the only thing that could save his life." and insurance companies saying " We don't believe that, think of something different/cheaper" We have a problem.

[Hamhock]

Hey, I never said all. But fer ****'s sake, even I know they are in it to make money. If a kid gets cancer, and I have seen this on many different reports, insurance companies pull out the "We don't cover that type of cancer" or "At this time, we cannot cover this treatment" When you have a doctor saying "This treatment is the only thing that could save his life." and insurance companies saying " We don't believe that, think of something different/cheaper" We have a problem.

do you actually know someone who has had a reasonable medical treatment ultimately denied by their insurance?

[PhilTLL]

do you actually know someone who has had a reasonable medical treatment ultimately denied by their insurance?

Does myself count?

[Sooner_Havok]

do you actually know someone who has had a reasonable medical treatment ultimately denied by their insurance?

Well, I guess that would depend on how "reasonable medical treatment" is defined. Are we going by the insurers definition or a trained medical professionals'?

[Hamhock]

Does myself count?

absolutely. how did you resolve it?

[Hamhock]

Well, I guess that would depend on how "reasonable medical treatment" is defined. Are we going by the insurers definition or a trained medical professionals'?

more than one trained medical professionals.

i know some pretty screwed up trained medical professionals.

i hope Doc doesn't read this.

[Sooner_Havok]

more than one trained medical professionals.

i know some pretty screwed up trained medical professionals.

i hope Doc doesn't read this.

Dude, if you go to Doc with cancer, he'd just give you a salt tablet and tell you to walk it off :D

[r5TPsooner]

I get at least one mailing a month from them wanting me to refi an automobile loan thru them. Glad I tore it up and threw it away.

[Frozen Sooner]

Dude, if you go to Doc with cancer, he'd just give you a salt tablet and tell you to walk it off :D


Well, he's no guy with a PhD in something who's spent time studying medicine in pre-technological tribal settings, so you have to make allowances.

[PhilTLL]

absolutely. how did you resolve it?

How can you, really? There's not much recourse. I bitched about it for awhile, stalled, asked for a reappraisal, and eventually settled it, I assume because the company's legal bills were approaching the cost of settling. And that was just for a one-time visit for pain meds to treat a severe muscle pull, the only acute injury I've sought treatment for since I was a little kid.

Was it playing the system and did it cost both sides unnecessary time and money? Yeah, definitely, but my only other option was to bend over and pay the whole thing, and I found that highly unfair, both to my wallet and my sensibilities. I didn't think I had much of a choice other than to gum up the works. And that ridiculous level of administrative overhead is part of the reason the system is busted today.

Other issues, like repeatedly getting policies denied or dropped for a mere history of mental health care, I still haven't fixed.

[shaun4411]

This is where i dont like having a company that is for profit being in business to accept payments for a service that is not necessarily a luxury, but a necessity (auto, and health insurance). this is the only argument i would ever listen to in favor for a nationalized healthcare or provided insurance because the govt is not a for profit entity. so in a sense, people *should* receive proper care without rejection.

[jkjsooner]

Here's another example. You are very sick and you are rushed to the hospital.

While there the doctors perform all types of tests on you. Barely conscious and having no idea what is going on you are in no situation to dispute. Then the doctors keep you in the hospital for observation and prescribe all sorts of life saving medications.

The insurance company replies:

1. We do not cover these tests. You should have had these tests.
2. We do not cover this medication. You should have these medications.
3. We will not pay for a hospital stay in this condition even though it was requested by the doctor.

All of a sudden you are looking at a bill for tens of thousands of dollars.

This entire scenario hasn't happened to me but I have isolated incidents similar to #1 and #2.


Here's another one. My coworker was hiking in the Shenendoa's a couple of months ago. He was bitten by a rattlesnake. It took four hours to get him off the trail and to an awaiting helicopter. They had to fly him to a hospital that had the antivenom. The antivenom itself cost about $20k. All in all it has cost over $40k and he has no clue how much of it is going to be covered by the insurance. It is sounding like not much.

Now let's say it's a 22 year old. Do you think he's had time to save that kind of money? Heck no.

And this was for a rattlesnake bite not brain cancer.

[Scott D]

do you actually know someone who has had a reasonable medical treatment ultimately denied by their insurance?

how do you define reasonable? Are you seriously set for life if you die in a car accident? Your family is taken care of for the rest of their natural lives? Have you planned out how long their natural lives will be? Have you prepared for the contingencies if your child is autistic or gets cancer?

If so then good for you boy scout. But, not everyone can be prepared for every possible thing that could go wrong in life. But, I'll continue to play..what happens Hamhock if your kid gets cancer and needs treatment. Which is likely to get top priority, cancer treatment for your kid..or your mortgage payment?

[SoonerKnight]

how do you define reasonable? Are you seriously set for life if you die in a car accident? Your family is taken care of for the rest of their natural lives? Have you planned out how long their natural lives will be? Have you prepared for the contingencies if your child is autistic or gets cancer?

If so then good for you boy scout. But, not everyone can be prepared for every possible thing that could go wrong in life. But, I'll continue to play..what happens Hamhock if your kid gets cancer and needs treatment. Which is likely to get top priority, cancer treatment for your kid..or your mortgage payment?

Didn't know that's why people were losing there houses! I thought it was the sub prime loans that had ballon payments along with what the actual mortgage was going to be. I looked at buying a different townhome in 204. It was located in Denver and for that privalage it was priced at $225,000! Not even a really nice neighborhood either!

I asked about different loan options oh they could get me the payment I could afford but if I had bitten I would now be paying over $2000 mortgage plus a ballon payment and a bunch of other crap! He kept trying to sell this to us and we kept asking for a fixed interest rate! We walked! The point is plenty of people did this and now we are all gonna pay for it!!!!!

[Scott D]

Didn't know that's why people were losing there houses! I thought it was the sub prime loans that had ballon payments along with what the actual mortgage was going to be. I looked at buying a different townhome in 204. It was located in Denver and for that privalage it was priced at $225,000! Not even a really nice neighborhood either!

I asked about different loan options oh they could get me the payment I could afford but if I had bitten I would now be paying over $2000 mortgage plus a ballon payment and a bunch of other crap! He kept trying to sell this to us and we kept asking for a fixed interest rate! We walked! The point is plenty of people did this and now we are all gonna pay for it!!!!!

Subprime loans are the 'sexy' news story as to why people have had foreclosed homes. Certainly more 'sexy' than fixed rate mortgages having their homes foreclosed. Definitely more 'sexy' than rising unemployment and layoffs causing some people to have their homes foreclosed. Absolutely more 'sexy' than rising medical costs forcing people to choose.

I'm with you in the fact that home prices were overinflated for far too long, and that the market was correcting itself when the prices began to fall. But it's far too simplistic, to just blanket everyone as being part of the "subprime crunch".

[Hamhock]

how do you define reasonable? Are you seriously set for life if you die in a car accident? Your family is taken care of for the rest of their natural lives? Have you planned out how long their natural lives will be?

It's called term life. It's relatively cheap. If i get hit by a bus today, my family can live on the earnings indefinately. Those earnings are about 85% of my current income. I've named a trustee to administer the money so the wifey doesn't have to worry with it. He has instructions to invade principal for things like college and weddings. That's all assuming my wife doesn't get remarried.



Have you prepared for the contingencies if your child is autistic or gets cancer?

It's called health insurance. My plan covers centers of excellence like Mayo, MD Anderson, etc. I'd be out my deductible and coinsurance.


If so then good for you boy scout. But, not everyone can be prepared for every possible thing that could go wrong in life. But, I'll continue to play..what happens Hamhock if your kid gets cancer and needs treatment. Which is likely to get top priority, cancer treatment for your kid..or your mortgage payment?

Please see my answer about health insurance.

It's all about choices. We choose to own vehicles about 6 years older than my peers, so as to not have a car payment. My house is about half the size of my buddies earning the same income, in a neighborhood that isn't near cool enough for the up & comers. I choose an emergency fund and life insurance. They choose two bmw lease pmts and enough monthly credit card interest to make a monthly payment on my minivan.

It pisses me off to no end for people to live beyond their means, have something unexpected happen and say "Oh crap, I had no idea something unexpected might happen!". Then they look around expecting someone else to bail them out.

[Hamhock]

Which is likely to get top priority, cancer treatment for your kid..or your mortgage payment?

the notion that the current mortgage crisis is due to kids getting cancer, or any such similar calamity is bogus.

i'll be the first to vote for a government bailout for everyone who's kid got cancer. how many decimal places did we cover?

[jkjsooner]

the notion that the current mortgage crisis is due to kids getting cancer, or any such similar calamity is bogus.

i'll be the first to vote for a government bailout for everyone who's kid got cancer. how many decimal places did we cover?

Not many of us were saying that. I, for one, hate the idea of a bailout and hate the speculators who drove up housing prices so high that they became essentially unaffordable.

I was arguing the cancer argument because one post proclaimed that you should always be prepared for anything that may happen and as we've pointed out that is just not possible.

It was a side argument only.

[jkjsooner]

Didn't know that's why people were losing there houses! I thought it was the sub prime loans that had ballon payments along with what the actual mortgage was going to be. I looked at buying a different townhome in 204. It was located in Denver and for that privalage it was priced at $225,000! Not even a really nice neighborhood either!

I asked about different loan options oh they could get me the payment I could afford but if I had bitten I would now be paying over $2000 mortgage plus a ballon payment and a bunch of other crap! He kept trying to sell this to us and we kept asking for a fixed interest rate! We walked! The point is plenty of people did this and now we are all gonna pay for it!!!!!

Again I'll refer you to my previous post. We were not claiming hardship situations caused this problem.

And, by the way, I cringe every time I hear subprime. This wasn't about subprime. It was about easy money driving housing prices beyond affordability and about any number of loan products (be it subprime, ALT-A, prime) that allowed owners to buy something while temporarily not paying the full price of ownership.

Subprime got the media's attention because subprime loans generally reset faster than other types of loans. We still have huge waves of ARM's waiting to reset in the coming years. Unfortunately, this problem has been tagged "subprime" so it will probably always keep that label.

[Hamhock]

Again I'll refer you to my previous post. We were not claiming hardship situations caused this problem.



so why didn't your co-worker's insurance cover the snake bite?

i guess i'm just removed from reality. i've never heard a normal health insurance plan (i've worked for a third party administrator of health insurance plans and at one time in my life was a licensed insurance agent) denying coverage like that.

granted, it makes for great grisham novels and sexy 20/20 episodes, but as far as people i know, i just don't see it happening. i know plenty of people who were ruined because they were without health insurance for various reasons, but never anyone who had they're coverage arbitrarily denied. insurance companies have written policies and medical review procedures they must follow.

[yermom]

Subprime loans are the 'sexy' news story as to why people have had foreclosed homes. Certainly more 'sexy' than fixed rate mortgages having their homes foreclosed. Definitely more 'sexy' than rising unemployment and layoffs causing some people to have their homes foreclosed. Absolutely more 'sexy' than rising medical costs forcing people to choose.

I'm with you in the fact that home prices were overinflated for far too long, and that the market was correcting itself when the prices began to fall. But it's far too simplistic, to just blanket everyone as being part of the "subprime crunch".

i wouldn't file those things under housing crisis though. housing crisis to me is someone who didn't have any of those things happen, yet still can't pay for their house

[yermom]

so why didn't your co-worker's insurance cover the snake bite?

i guess i'm just removed from reality. i've never heard a normal health insurance plan (i've worked for a third party administrator of health insurance plans and at one time in my life was a licensed insurance agent) denying coverage like that.

granted, it makes for great grisham novels and sexy 20/20 episodes, but as far as people i know, i just don't see it happening. i know plenty of people who were ruined because they were without health insurance for various reasons, but never anyone who had they're coverage arbitrarily denied. insurance companies have written policies and medical review procedures they must follow.

not everyone is able to pick the cheaper house, or the cheaper car, that's all they can afford. not everyone is making more than they can actually survive on comfortably

[Scott D]

i wouldn't file those things under housing crisis though. housing crisis to me is someone who didn't have any of those things happen, yet still can't pay for their house

but that's the problem. It's too easy and to neatly wrapped to just package everyone who has either lost their house, or could lose their house as being people who were just stupid and overextended themselves. And we didn't even broach the subject of divorce, and how that can screw things up too.

It's just far easier to say that everyone except yourself is stupid for not being you and living in that fantasy world.

[Scott D]

It's called term life. It's relatively cheap. If i get hit by a bus today, my family can live on the earnings indefinately. Those earnings are about 85% of my current income. I've named a trustee to administer the money so the wifey doesn't have to worry with it. He has instructions to invade principal for things like college and weddings. That's all assuming my wife doesn't get remarried.

And if you become "a vegetable"?


It's called health insurance. My plan covers centers of excellence like Mayo, MD Anderson, etc. I'd be out my deductible and coinsurance.

You must be in a position in an industry that is secure with their profit margin at the current time. Keep an eye on any coworkers who may have chronic problems medically. I bet you that as time goes on if things start to go south at work they'll be the first medical insurance casualties. Especially with how some insurance companies are rewriting their policies. And even moreso if your employer changes insurance companies. You've got a 50% chance of a pre-existing condition making you ineligible, or unable to get full coverage. I work with someone whose husband makes good money for Ford. However, changes to their insurance structure have changed the way their coverage works and they have to meet certain goals to reach certain insurance discounts and coverage bumps. Luckily for them it's only minor things in regards to their health, and they don't have a severe condition.


It's all about choices. We choose to own vehicles about 6 years older than my peers, so as to not have a car payment. My house is about half the size of my buddies earning the same income, in a neighborhood that isn't near cool enough for the up & comers. I choose an emergency fund and life insurance. They choose two bmw lease pmts and enough monthly credit card interest to make a monthly payment on my minivan.

It pisses me off to no end for people to live beyond their means, have something unexpected happen and say "Oh crap, I had no idea something unexpected might happen!". Then they look around expecting someone else to bail them out.

What about the people who are getting by in the first place, but bust their asses to get a house because their family has gotten larger. And now it turns out they could be losing said house because of a downturn in an economy? That same person is busting their ***, but hey...their dollar just isn't going as far as it could 6 months ago. Damn them for being stupid and being where they are.

[Dio]

this is why im glad my bank (BOK) is owned by a billionaire oil tycoon that uses his BOK profits (or losses) to offset the tax burden of his other income.

Unless he has to float the bank a loan to cover a major cluster**** by one of the (now ex-)Directors.

http://biz.yahoo.com/e/080724/bokf8-k.html

[Chuck Bao]

My new condo purchase is being financed by my company. We are really, really cash rich.

I'm getting a five-year loan at a fixed 2.25%.

I'm going to be really slumming it. But, I still have to brag that I can pay off my mortgage loan in five years and the mortgage payment is less than the rent I pay on my current apartment. And, I'm not a burden on anyone. At least, give me that.

[tommieharris91]

My new condo purchase is being financed by my company. We are really, really cash rich.

I'm getting a five-year loan at a fixed 2.25%.

I'm going to be really slumming it. But, I still have to brag that I can pay off my mortgage loan in five years and the mortgage payment is less than the rent I pay on my current apartment. And, I'm not a burden on anyone. At least, give me that.

The Obamessiah considers you to be a blasphemer. :texan:

[Hamhock]

And if you become "a vegetable"?

LTD. Long Term Disability Insurance. But hey, add them to the list. Vegetables and people who's kid gets cancer. They get a free ride.

I feel like I'm having the abortion debate that focuses on incest and rape when they represent the tiniest fraction.




You must be in a position in an industry that is secure with their profit margin at the current time. Keep an eye on any coworkers who may have chronic problems medically. I bet you that as time goes on if things start to go south at work they'll be the first medical insurance casualties. Especially with how some insurance companies are rewriting their policies. And even moreso if your employer changes insurance companies. You've got a 50% chance of a pre-existing condition making you ineligible, or unable to get full coverage. I work with someone whose husband makes good money for Ford. However, changes to their insurance structure have changed the way their coverage works and they have to meet certain goals to reach certain insurance discounts and coverage bumps. Luckily for them it's only minor things in regards to their health, and they don't have a severe condition.

I'm not sure what you're talking about. HIPAA prevents prexisting if you've had previous group coverage.




What about the people who are getting by in the first place, but bust their asses to get a house because their family has gotten larger. And now it turns out they could be losing said house because of a downturn in an economy? That same person is busting their ***, but hey...their dollar just isn't going as far as it could 6 months ago. Damn them for being stupid and being where they are.


News flash. You may lose your job in teh future. Plan accordingly.

[jkjsooner]

The thing is, 10 years ago people lost their houses due do cancer, divorce, floods, etc. yet we did not bail them out.

This housing mess was caused by speculators and irresponsible buyers who were willing to pay two or three times the true value of their house. Those are the people we are bailing out.

That being said, hardships do happen and nobody who isn't independently wealthy can plan for all possibilities. My MIL had a 30 year illness. They had insurance but insurance can't cover everything and the illness absolutely impacted my FIL's career and life. Rather than advancing in his career he spent 30 years taking care of his wife. (Yes, he worked but it became a job not a career.) They were financially well off 30 years ago and were prepared with insurance and everything but 30 years of dealing with an illness took its toll. They lost their house and pretty much lived day to day financially.

And, by the way, at the end they were paying over $500 a month on prescriptions which was above and beyond what the medical plan covered. Not to mention the thousand or so a month for home health care (partially covered by Medicare) so that the FIL can actually have a job.

I just wish people would get off their high horse about being prepared for everything and realize that nobody can prepare for something like that.

[Hamhock]

I just wish people would get off their high horse about being prepared for everything and realize that nobody can prepare for something like that.

i'll be the first to admit you can't prepare for everything. I just wish people would quit pretending that the current mortgage crisis was caused by cancer and other awful calamities. Over extending yourself while things are going well is not an awful calamity.

[jkjsooner]

i'll be the first to admit you can't prepare for everything. I just wish people would quit pretending that the current mortgage crisis was caused by cancer and other awful calamities. Over extending yourself while things are going well is not an awful calamity.

I could not agree with you more.

In many cases we are bailing out people who happened upon hundreds of thousands of dollars in equity and didn't know what to do with it so they doubled down or bought expensive German cars.

I have a little more sympathy for those who unfortunately arrived at housebuying age from 2004 to 2007 and overextended themselved because they were forced to if they wanted to buy.

These people were duped into thinking:

1. Renting is not an option.
2. They must jump on the bandwaggon before prices go up beyond any chance of reasonably affording one.
3. Even if they can't afford it, they will be rewarded by continuous appreciation.
4. They can always refinance out of their high interest ARM.
5. We are running out of land.

All of these are ridiculous if you think about it and IMO a normal rational person should have concluded that these were ridiculous.

As for #2, can't people figure out that if nobody could afford a house then the prices are not sustainable? Studies showed many people really thought that housing would continue at a 15% appreciation for the next 20 years. (Seriously.) An eighth grader would be able to plug that into a calculator and determine that an 16 fold increase from the current outrageous level is just plain ridiculous. (Even if you adjust for inflation it's still almost a 10 fold increase.)

The thing is, even economists were clueless. I think in many cases they were willingly clueless because either 1) they receive money from the real estate industry or 2) they didn't want to rock the boat.

I'm not an economist and I can't tell you whether equities or gold or many things are overpriced. I just don't understand them well enough. I can say, however, that if nobody can afford a commodity that is essentially unlimited and can be produced on demand then the price must fall. It's just plain common sense.

[tommieharris91]

They mostly shut up because of #2. Then again, I've been in Norman during the creation and the popping of the housing bubble. Norman hasn't been affected by the bubble on way up or the way down.