Sam Zell talking about the housing market

Tilted

Tilted

..
Mr. Zell is one of the smartest, most pragmatic, people you could ever listen to. I wish more people would give more credence to the simple realities he points to. (This video is about 13 minutes, but worth listening to in my opinion - the conversation is briefly interpreted in the middle by breaking news about Sprint's earnings, but they pick back up on the housing market conversation after.)

Sam Zell: Housing Hole Bigger Today - CNBC Video
 
Larry Gude

Larry Gude

Strung Out
Tilted said:
Mr. Zell is one of the smartest, most pragmatic, people you could ever listen to. I wish more people would give more credence to the simple realities he points to. (This video is about 13 minutes, but worth listening to in my opinion - the conversation is briefly interpreted in the middle by breaking news about Sprint's earnings, but they pick back up on the housing market conversation after.)

Sam Zell: Housing Hole Bigger Today - CNBC Video
Click to expand...

OK, I am enjoying this.

Play by play; Zell seems to be saying TARP was fine, saving the banking system but, that that is different from saving housing. I see the distinction but, I do not see how you separate the two; it's as if we're talking about saving the lungs because we must be able to breathe but, that has nothing to do with the heart. Point being housing is THE central segment in banking.

Also, while I get the moral hazard bit about responsibility for home loans, we used to take care of that by requiring 20% down and so forth. I haven't watched it all yet, but, he's not mentioning the, as I see it, evils of TARP where yeah, it saved the lungs but, it also gave us a free pass on our heart troubles and B, no mention, so far, of the impact of GSE's and how it came about that all the old rules of home lending disappeared to feed that government driven model.

Back to the video...
 
Larry Gude

Larry Gude

Strung Out
Ok, now, Zell wants all the programs gone so that banks go get their properties and take ownership and clean 'em out. Well, that was an impossibility with TARP.

I am not following him how he can be, without saying it but, I thought implied it, for TARP, the epitome of telling the banks 'don't worry about your assets' and an enormous government program yet then, want no government programs after the fact to motivate them to go worry about their properties. I mean, at the time of TARP, right there was the motivation to be creative, to be aggressive, to go to home occupiers and make deals to keep people in them and the cash flowing. Where does the motivation come from for a bank, post TARP, to suddenly, when their balance sheets have now been guaranteed, come from to go be aggressive, be creative and work with folks?

TARP, to me, caused such a massive distortion in the entire dynamic that it MUST be addressed by a Resolution Trust sort of program on a one time basis to reset the markets, nation wide.

This guy, I think, wants to buy a million $400,000 houses that are only worth $200,000 for $100,000.
 
Larry Gude

Larry Gude

Strung Out
Tilted said:
Follow up from Santelli and Liesman (those guys are usually fun, but they played a little too nice for my taste in this case)...

Sam Zell Calls Mortgage 'Moral Hazard' - CNBC Video
Click to expand...

See, Santelli is operating in a vacuum; what about the bond holders!? Buying a home is not the same as borrowing $200,000 and heading for Vegas and Rick's card laid is a card played view would be appropo if folks DID borrow and head to Vegas. However, housing does not happen in a vacuum. There are zoning and development rules, community rules, in addition to all the banking non sense and GSE's, the CDO's, all of that played into affecting the 'odds' of what a home value would be in 6 months or 2 or 5 years.

Builders, developers, agents, insurers, home goods, yes, flowers, any and everything that goes on in and around a home economically, including bond holders, we are ALL in this together. If your neighbors house is on fire, you don't step back and say "got nothing to do with me."

Liesman is right on this one; there is a role ONLY government can play. This thing can NOT unwind itself under market conditions BECAUSE the market conditions, the 'constipation' Zell mentioned, can ONLY get unclogged by government. Rick wants a finger pulled out but seems oblivious in his quest for sudden 'rule of law' to the risk of the entire damn bursting. Government WAS the problem. Government intervened at the ONLY moment the markets might have fixed themselves and government has so further gummed up the works ONLY government can clean the pipes.

Resolution Trust type one time, nationwide gig. A residential version. Reset.
 
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Tilted

Tilted

..
Larry Gude said:
OK, I am enjoying this.

Play by play; Zell seems to be saying TARP was fine, saving the banking system but, that that is different from saving housing. I see the distinction but, I do not see how you separate the two; it's as if we're talking about saving the lungs because we must be able to breathe but, that has nothing to do with the heart. Point being housing is THE central segment in banking.

Also, while I get the moral hazard bit about responsibility for home loans, we used to take care of that by requiring 20% down and so forth. I haven't watched it all yet, but, he's not mentioning the, as I see it, evils of TARP where yeah, it saved the lungs but, it also gave us a free pass on our heart troubles and B, no mention, so far, of the impact of GSE's and how it came about that all the old rules of home lending disappeared to feed that government driven model.

Back to the video...
Click to expand...

Yes, housing in general and the financial system are closely tied - they're intertwined to a significant degree. Housing is obviously very important, I don't think he's suggesting to the contrary. The meaningful difference (i.e. that he's alluding to) in this context relates to the degree (and rapidity) of possible contagion. It relates to how quickly effects on one or the other (i.e. the financial system as compared to the housing market) cascade. It relates to one being fairly described as a system while the other is fairly described as a market. It relates to how damage spreads in one as opposed to the other, and thus the plausibility of one or the other being left to market participates to fix.

By way of analogy: It's like comparing the need to keep public roads passable during (and after) a blizzard versus the need to clear people's private roads, and fix damage to their residences, during a blizzard. Without doing the former, nothing can function - rescue vehicles can't get where they need to, electricity can't be restored, people can't get to the stores for supplies. Society can't function - it's a situation that can significantly negatively impact everyone, but there isn't much that they can do about it on their own and it has nothing to do with what they themselves did and whether they prepared well enough or failed altogether to prepare. When it comes to people's private roads, and their own private property, they are capable of taking care of it themselves - or they need to be able to (perhaps with help they secure themselves). And, to the extent they can't, it doesn't have as pronounced an effect on everyone else. In this case (i.e. with weather), they may not be particularly responsible for whatever pain they end up enduring (though they may be to some degree), but with the housing market problems the people that would be hurt most would, for the most part, be the ones responsible. They could have made better decisions and probably should have.

With the housing market, we can let individual parties take the pain resulting from their actions and decisions - and that would include banks and homeowners. Would there be some effect on other members of society? Sure, but we have that as it is (to perhaps a greater degree) - with the government's attempts to artificially make the market and cushion the blows for individuals. With the financial system, the contagion effect would have been much more severe, would have affected the non-guilty parties to a much greater degree, and would have been far less avoidable. In one case, we're talking about a system that either works or doesn't - for everyone. With the other, we're talking about a market that is made up of varying degrees of culpability, varying degrees of pain, varying degrees of success and failure - it can work through the bad to get to the good without completely seizing up.
 
Larry Gude

Larry Gude

Strung Out
Tilted said:
...the contagion effect would have been much more severe, would have affected the non-guilty parties to a much greater degree, and would have been far less avoidable. In one case, we're talking about a system that either works or doesn't - for everyone. With the other, we're talking about a market that is made up of varying degrees of culpability, varying degrees of pain, varying degrees of success and failure - it can work through the bad to get to the good without completely seizing up.
Click to expand...

I don't disagree but, the pressure that that moment would have created, the enormous pressure necessary to move congress, a national emergency, was, I think, a golden opportunity to actually fix things, to actually stop the snow storm, to actually clear all the roads at once.

As it was, the main roads were plowed, the people who were supposed to keep it open, didn't but they got paid for it anyway without having done the work and the entire Too Big To Fail model was consecrated and the argument was set for the bail outs, the stimulus and whatever else folks wanna do down the road.

I think.
 
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