Are record-low interest rates masking high-cost mortgage lending?

Are record-low interest rates masking high-cost mortgage lending?

Five leading economists weigh in and the answer may surprise you

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Nowcast will predict in real time

The New York Times rambles, and mangles mortgages along the way

Mortgage finance and mortgage regulation aren’t the paper’s strong suits
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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.

Rentership society? Insider trading on Russian sanctions?

What We're Reading: The Good Friday edition

April 18, 2014

It’s a quiet Good Friday and with the markets closed and many off, it’s the perfect time to catch up on a little extracurricular reading.

The always insightful and funny Confounded Interest blog takes a look at what factors are driving America away from being a homeownership society and more into a rental society where it’s a landlord’s world, and you just live in it.

“At a minimum, the big push for homeownership that started under President Bill Clinton has come completely unraveled, when the homeownership rate is back where it started in 2005.”

It’s a lot more than just rhetorical fireballs – George Mason University’s professor of real estate financing, Anthony Sanders, backs his posting up with tons of data and charts. It’s worth reading through the archives if you want an antidote to the always optimistic mainstream financial press that seems to be wanting to sell you something.

Meanwhile, over at the Wall Street Journal, they’re enabling the continuation of a flawed meme – the use of pre-tax income data to look at the so-called income inequality problem.

“While average income has returned to pre-recession levels, income gains have been distributed unevenly,” Mr. Cobet said.

The economist mined Labor Department data to show that the top 20% of earners accounted for more than 80% of the rise in household income from 2008-2012. Income fell for the bottom 20%.

The problem? No one gets to keep pre-tax income.

Veronique de Rugby takes this on noting that this “income inequality” problem looks very, very different after taxes – just like your paycheck.

The data, from the CBO, measure after-tax income as “the sum of market income and government transfers, minus federal tax liabilities.”  

Contrary to popular belief, the richest 1% of Americans have not gotten richer during the past decade — as the chart below, showing after-tax income changes, shows. In fact, by Burtless’s calculations, the richest 1% of Americans are the only group whose incomes shrunk, falling by an average of 4%.

(There is a problem with incomes – wage stagnation for the middle class – and what’s driving it is not how much more than 1% make than the rest of us.)

I may play a lawyer on TV, but I’m not one, nor am I an agent for the U.S. Securities and Exchange Commission. So follow me through this report from Bloomberg.

The Obama administration told asset managers last week that it was planning additional sanctions against Russia over the conflict in Ukraine.

Officials from the Treasury Department and the National Security Council met in Washington with mutual-fund and hedge-fund managers, according to a person who attended. Their comments sent a message that more sanctions are on the way and that investors, if they were concerned about the impact, should manage that risk, said the person, who asked not to be identified because the discussions weren’t public.

The meeting, convened a week before talks with Russia in Geneva that ended yesterday, left managers grappling with the question of whether the government intended to follow through, or was trying to trigger asset sales through the threat of sanctions, said the person. Former administration officials have said forcing Russia out of global financial markets is the strongest tool President Barack Obama has at his disposal in trying to defuse the crisis between Russia and Ukraine.

Am I wrong here, or did the administration just organize, enable and promote insider trading?

A recent study titled Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens by Martin Gilens of Princeton University and Benjamin Page of Northwestern University.

The most alarming of its conclusion? The United States, despite some trappings of being democratic and a constitutional republic, is actually an oligarchy.

“Despite the seemingly strong empirical support in previous studies for theories of majoritarian democracy, our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts. Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise. But we believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.”

If this were from a dorm-room bull session or one of the silly commentariat at MSNBC or Fox, it would be easily dismissed. But this is a pretty meaty, well-sourced, data-driven, peer-reviewed and soon to be published study from respectable scholars, even if this is one of the soft sciences.

And there’s something even more troubling, as Tyler Durden at ZeroHedge notes – the time period from which the data is driven – it’s all pre-bailout, pre-too-big-to-fail and pre-Dodd-Frank.

What is most incredible to me is that the data under scrutiny in the study was from 1981-2002. One can only imagine how much worse things have gotten since the 2008 financial crisis. The study found that even when 80% of the population favored a particular public policy change, it was only instituted 43% of the time. We saw this first hand with the bankster bailout in 2008, when Americans across the board were opposed to it, but Congress passed TARP anyway (although they had to vote twice).

Even more importantly, several years of supposed “economic recovery” has not changed the public’s perception of the bankster bailouts. For example, a 2012 study showed that only 23% percent of Americans favored the bank bailouts and the disgust was completely bipartisan, as the Huffington Post points out. 

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