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FDIC Closes Netbank, One of the First Online Banks
An anonymous reader writes "NetBank, one of the first internet banks in the country was closed by the FDIC on Friday. Being a loyal customer for 8 years, I am saddened that an institution that provided me with so much great service and a cool, hi tech way to conduct my financial transactions is shutting down. Seems that mortgage defaults are to blame: 'NetBank's closure marks the first bank to close since the recent U.S. housing boom deflated. Critics have said that weak underwriting standards have led to record number of homeowners entering the foreclosure process. But NetBank's rare Internet-based business strategy made it a unique financial institution and its problems aren't expected to mirror issues facing other mortgage lenders, analysts say.'"
It is the Office of Thrift Supervision that has closed NetBank, not FDIC: http://www.ots.treas.gov/docs/7/777071.html
The US news services, the govt and the market collude to deliver bad news on fridays
when we citizens faithfully spend our evening at the pub and dont read the news.
I bet if you really wanted to find out whats really going on in the markets you
could simply aggregate all of the Friday financial news.
Will anyone be talking about netbank on Monday. Unlikely.
But here's the creep.
2.5 billion dollars is a small bank but not a community bank.
If you had money to bet on it given how scared the bond market is over this,
do you think theres a bank with oh say 100 billion thats going to fail
in say the next year or so.
You can bet your bottom dollar on it. Oh wait you already did.
You shouldve kept it under the mattress.
Yep, It's a bubble and some people are going lose their shirts.
"It's a great time to buy a house."
"You'll never lose money in real estate".
"Real Estate is a great investment".
"Sone else is bidding on the property".
Bottom line is with stagnant median income, people just can't afford a house. The real estate sector, after an unprecidented run up, is undergoing correction and it will be long and will take some people under. If you're renting or can afford your mortgage, you'll do okay. Every else might as well mail in the keys. If the debt is to netbank, send the jingle mail to ING direct instead. This is the downside of mass immigration and easy money, people. Time to buck up!
Banks are being closed in the US? Good grief. Here we are worrying about Northern Rock having a bit of a wobble and the US is closing banks!
Nice work on decimating your economy!
weak underwriting standards have led to record number of homeowners entering the foreclosure process
I've never understood the wildly inflated home prices in some areas. Assuming that these are "market prices" and not crazy owners' wished-for buyouts, at some point no one will be able to afford to own a home.
What happens then? A house market crash?
The only people that win from high real estate prices are those that cash-in and move somewhere cheaper, the lenders (usually) and the agents.
Inventor of the LOLbalrog meme.
"They had significant problems with respect to loan underwriting, poor documentation, and a high amount of early payment defaults..."
According to the article, it wasn't just that the bank failed due to the mortgage crisis, it was that they poorly ran their bank. I worry a little about ING as well because they are promoting their ARMs so much. I've tried to find details on a 15 or 30 year fixed mortgage from them and cannot find it.
If you want your life to be different, live it differently.
ING Group is pretty major, I don't think they are going under any time soon (ING Direct is one of their divisions). However if it does, you needn't worry as mentioned this is what FIDC insurance is for. Up to $100,000 of your deposit is covered by the FDIC. So unless you've got more than that in there, you are fine. If you do have more, may I suggest you seek the services of a financial consultant, as that is too much money to just leave sit in a bank account, even one with a reasonable interest rate.
Most banks do not try to discourage deposits more than $100K. I recall seeing offers of jumbo CDs starting at $100K, for a slightly higher rate. The very first interest payment, therefore, is uninsured.
An E*TRADE salesman once tried to convince me that a deposit of over $100K was quite safe and that the FDIC insurance is for a worst-case scenario that was essentially impossible to happen. He said lots of people have over $100K and implied I was paranoid even to bring it up, in an attempt to get me to consolidate all of my accounts with E*TRADE (which, at the time, offered a higher interest rate).
For about $40,000, you can get a small one or two bedroom apartment either in the midwest or in a rural town here on the eastern side.
In my city exactly, at fair market value, you could get about 1/5 of a four-bedroom house. For $400,000, you could buy two.
Or, one one-bedroom studio in Manhattan.
I do 90% of my shopping online, but online banking has been a touchy subject. I became a NetBank customer 6 or 7 years ago only because they bought my account from CompuBank... my PREVIOUS online bank that went belly up also. I know these failures were due to bad management and not anything inherantly wrong with an online model, but after the run I've had I just don't think I could trust an online-only bank again. Come Monday morning, I'll be switching my payroll direct deposit over to a credit union account... and saying farewell for good to banking through that series of tubes they call the Internets.
In California you're pretty much SOL under 200K and you're looking at 300k if you want to live in any reasonably sized city.
My days of not taking you seriously are certainly coming to a middle...
The defaults aren't something that 'just happened' to them - they chose to get involved in what anyone should have seen as being an extremely risky market. (Buying mortgage paper on the secondary market.) But the ultimate culprits are the (all but unregulated) mortgage companies, who loan the money then promptly sell the paper - they've taken their money and profit and are walking away virtually scott free from this developing crisis.
I've enjoyed using Netbank for several years now, and as someone who moves around a lot having a branchless bank equally accessible from anywhere in the country has been nice. They even have (had) ATMs here in B.F. Mississippi. I'm sad to see them go.
Are there similar alternatives to Netbank that anyone would recommend?
I signed up for an account with them a couple years back and they socked me with several hundred dollars in fees within the first month. Good riddance.
Your design to a real part online: Big Blue Saw
Depends on the market and whether local salaries can support local housing prices. Take NYC -- housing prices continue to rise significantly despire all the market troubles? Why? - Because the average banker (there are thousands of them) can make $350k these days, at that point, an $850k studio makes perfect sense. - Because when two bankers, each making even a modest $120k get married, their combined buying power easily affords them a $1M 1B apartment - Because the worthless dollar allows Brits and Europeans to easily purchase real estate as vacation homes But overall, yes, I agree, home purchasers will have to whether the storm depending on when they purchased their home and for how much. Otherwise they risk being underwater.
I mean, mostly I care because its a bank failure in general. I don't care any more or less because it's 'OMG ONLINE BANK WOW'. And of course, you would expect some banks to fail here and there right now: a lot of them made poor lending decisions and deserve the consequences. The good news is we've learned from previous bank failures and now at least most customers won't be out anything.
If you really want an online bank every major bank offers online banking. Some have more features than others, but there are a few where you can get an almost full service banking experience without ever visiting a branch. Until I started working at my bank, I didn't step foot in a branch for over a year. So I would suggest to find a major player, scope out their online banking, and pick someone who has branches in your area anyway, just in case you happen to have to conduct a rare in person transaction. If you don't think you need any branch banking ever, eTrade is in the bank business and they appear to be very financially stable.
====
Crudely Drawn Games
Shameless plug, as I built most of their tech architecture :-) -- check out Promontory Interfinancial Group's CDARS program. These guys take a regular bank's CD program and extend the FDIC coverage to $50M or more. The rates are basically the same and often higher.
Wow, guess I got out just in time. I pulled my money out of there a couple months ago, closed the account, and moved it into EverBank. When I signed up for NetBank in 2004, they had one of the most competitive interest rates for checking accounts available (according to Bankrate.com). However, as time went on I noticed there were more and more online banks that had better deals. I suppose it wouldn't have been too bad, it looks like all of NetBank's customers automatically are getting transferred to ING Direct.
Deleted
Not only is the Slashdot story wrong in that way, it is misleading in another way: "I am saddened that an institution that provided me with so much great service..." NetBank did not, however, have the best interest rates.
GMAC Bank and HSBC Direct had higher rates than NetBank.
BankRate.com is the site I used to find those two. BankRate.com is a poor quality resource for finding banks, in my opinion, but it is better than nothing. Does anyone know of a better site for shopping banks?
It's not really the poor economy, it's the fact Bush has used a bubble instead of actual growth.
We should have had a minor recession in 2001 or 2002, but then it would have been really hard to convince people they needed to funnel huge amounts of money into defense contractors pockets.
Money quote:
The liberal solution would have been to try and find a new tech boom, which in the case of the Gore administration would almost certainly have either been a micro and alternative energy boom or a telecom boom.
The Bush solution was different. The decision was made to base the economy on the real estate market. Record low interest rates flooded money into the mortgage market and the housing market boomed.
A boom sucks, at the end, No matter what you do, people will come in and lose their shirts. But some booms, in the long run, have much better results. The internet boom of the 90s changed the face of the planet. And even if some people lost their shirts in the stock market, well, no one made them invest.
This housing boom, OTOH, everyone did have to play. Even renters pay more when houses prices are up, although at least they won't have to watch the value of their house plummet. And it's left us with no tangible benefits at all except millions of shoddy McMansions.
We could have put that same amount of effort and money in alternate energy, and be in the middle of a nice stock correction now, where alternate energy company stocks are dropping through the floor and being picked up by a few big players which are merging with the big energy suppliers who are just now realizing they need to change their business plan. Which wouldn't hurt John Q. Public at all. John Q. Public, in fact, came out ahead because he got 'sponsored' for solar panels and that company, with a crappy business plan, went out of business, like during the tech crash.
If corporations are people, aren't stockholders guilty of slavery?
$300k won't buy you a dumpster in Santa Clara County, home to Silicon Valley. Median home price for Aug 2007 was $770k and average selling price was $944k.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
In small midwestern towns (not cities), about $40K would get a decent, but not new, house. Of course, these are areas where housing valuation hasn't boomed like it has on the coasts.
If, however, you were looking at farmland, $40K will get you maybe 8 acres of good corn ground at best.
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
That would get a small, old house in a very rural area, say 50+ miles from any major population center or anything else of potential interest. 3 to 5 times that much would get a nice house(1200sf to 3000sf) in most suburban areas in the South and Midwest. About 10 times that $420,000 to get a 2000sf house in Florida, Arizona, Nevada. The price goes up from there for New York City or California. The appraised value of property in California urban areas is about $1,100 per square foot (the last I heard, I would expect it to decline substantially from that over the next 5 years).
The Northern rock bank run caused the government of england to guarantee the entire country's banking system. This was a BIG mistake because now they have socialized the losses and kept the profits privatized. This will make the banks even more risk taking, knowing that they will be bailed out if anything goes wrong. And the taxpayers could be up for HUGE amounts of money to bail the banks out.
For reasons that had nothing to do with any intuition of an impending collapse (I was actually most annoyed that they didn't play nicely with Mac Quicken), I moved all my deposits from NetBank to USAA a few months ago. I've been very happy with USAA; they offer more online features and a better website UI than NetBank did, excellent customer service, and ATM-fee reimbursement (up to $10/mo or so). Their interest rates on checking aren't quite as high, but that's a small price to pay, particularly since it serves as encouragement to not build up a big balance in checking, but instead keep savings in a savings account and investments in investment accounts. USAA also doesn't gouge you if you want paper statements, although they give you the option to disable them and get everything online if you want.
In retrospect, now I know why the people at NetBank didn't seem too surprised when I closed my account down and moved everything out. At the time I was a little surprised that they didn't try to keep me as a customer at all, particularly since I'd been with them since the very beginning.
When NetBank first started, they were really a joy to work with. Their website was first-rate, their customer service was awesome (I recall calling them up in the middle of the night once and getting an actual human operator, not a "push x for foo" prompt tree), and they had a lot of nice little extras. Initially, they even sent out paper account statements on color, 3-hole-punched letterhead.
The nice paper for the statements went away in the first round of cost cutting, as did the human operator on the phone. The second round was charging $3/mo. for paper statements at all, and charging for checks. Then the website stopped getting any updates. And the last straw for me was when they did something funny to the backend system, and I started having to click "download transactions" twice in Mac Quicken in order to get it to download (the first try would *always* fail). After a few years of that, I got fed up and decided to leave.
In hindsight, I guess my timing was pretty good.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
I have been a happy NetBank customer for over five years now. Really good customer support, no fees on basically anything. I only did checking and savings account, and it is a shame that a bad housing market brought all of it down, but that is the way it goes.
I move around a lot, and with direct deposit I never felt the need for a brick-and-morter bank to ever go to. It never made sense for me to pay for the buildings that I was never using. NetBank also had some innovative features to make things easier like free overnight check deposits through any UPS store. I will definitely miss it.
It was really strange logging onto Slashdot this morning and learning that my bank had closed. I supposed I get to spend today researching online banks. I might end up sticking with my new ING account.
- (c) 2018 Hank Zimmerman
One data point doesn't make a trend. If you're right, there'll be more where that came from.
Sorry, the link I gave you is to their main banking page, in order to sign up for an eONE account, you need to use this link http://www.salemfivedirect.com/
--Dave
-- I'd give my right arm to be ambidextrous
Has anyone dealt with E*Trade Bank. Specifically the E*Trade Bank 1 Year CDs paying 5.1% APY. I have been using HSBC Online Savings, which is great, but they lowered interest from 5.05% APY to 4.5% APY with the half point drop by the Fed. I assume most other variable rate online savings will shortly follow suit making it pointless to move money around. Any fees for opening account, penalties for early withdrawal/minimum balance, or other problems with Etrade Bank. We have a local credit union which is currently paying 5.25% on an 11 month Share Certificate, but they charge a refundable on closing $10 to open an account so that the effective interest for amounts under 10,000 is lower than online savings if the account is never closed.
Yeah, it is a shame that they went under. I was with them for almost 100% of my almost 11 year military career which just ended, and needless to say, I appreciated the worldwide accessibility of their system, as well as the nice online bill payment options. I was very happy with their service right up until the FDIC notice was posted on their website. The customer service was good and the lack of fees was nice, and they even had a few ATMs in my local area. No, I didn't lose anything in this process and I am still able to log in to the same website pretty much seamlessly, but of course I'll be looking for some other banking option here in the near future.
There's no such thing as a "one-bedroom studio." If it has a separate bedroom, it's not a studio.
Also, studios go for about $550K and up these days, with 1BR apartments going for $850K+.
What exactly did the Bush administration do wrong, as far as economic management goes? No matter who was in power, after 9/11 any politician would have drastically increased homeland security and military spending. The Bush Tax cuts were very popular, and would have been implemented anyway, whether or not Bush was in power. Not only that, but while corruption is very photogenic, it's effects have been economically negligible. Our deficit is mostly the result of highly enlarged entitlement spending, which I just can't see tied to George Bush.
You seem to think that presidents are relevant to macroeconomic trends. This is a common political delusion, but in the absence of massively stupid legislation(On the level of what has been seen in Latin America), the Federal Reserve bank is the only office with any real power.
"This housing boom, OTOH, everyone did have to play. Even renters pay more when houses prices are up, although at least they won't have to watch the value of their house plummet. And it's left us with no tangible benefits at all except millions of shoddy McMansions."
Of course, all that we are left with are millions of homes. What use could they serve?
"We could have put that same amount of effort and money in alternate energy, and be in the middle of a nice stock correction now, where alternate energy company stocks are dropping through the floor and being picked up by a few big players which are merging with the big energy suppliers who are just now realizing they need to change their business plan. Which wouldn't hurt John Q. Public at all. John Q. Public, in fact, came out ahead because he got 'sponsored' for solar panels and that company, with a crappy business plan, went out of business, like during the tech crash."
Really? How exactly could we have done that?
Yeah $300k plus $300 per month assorted condo fees and there are some pretty bad parts of San jose where you would want your kid growing-up.
Really? Inflation is low, Unemployment is low, GDP growth is ok. I don't really see how you can define "poor health".
"plus illegal immigration, and the rise of the manufacturing sector in the third-world has put the American economy on shaky ground."
How has the presence of massively cheaper goods and labor made us worse off?
"The Fed has likely resorted to hyperinflation to try to exert control over this failing economy."
Hyperinflation? No, Zimbabwe has hyper-inflation. The US has lower inflation rates then most of developed world.
"The American dollar has decreased in value so quickly that it's at par with the Canadian dollar."
I hate it when people try and moralize an exchange rate. The decrease in the dollar's value will hurt some people, and be beneficial to others.
"Now we have the oil-producing nations considering switching to the Euro for their transactions, rather than the dollar."
I hear this nightmare scenario all the time, and I don't see the problem with it. The US will lose a couple billion dollars in seniorage revenue, and it will be somewhat harder to finance debt. I actually see this as a positive move.
My wife used to work for Netbank, at their HQ here in Atlanta.
After her previous company downsized, she talked to Netbank about a job; her first in-person interview was scheduled for September 11, 2001. Oooops. We saw the second tower hit live on the Today show right before she left; once she got there, the nation's entire financial industry went into lockdown, and she spent the whole day sitting in the lobby of their offices. Heh. Was that some kind of omen?
Anyway, she got the job, and went to work doing business analysis -- which promotions actually drew in new customers, what percentage of new customers retained their accounts, et cetera; she also maintained the list of ATMs that were in service and in their network; and was responsible for generating the customer lists for both the various e-mail contacts and the annual privacy policy mailings ( <geek_meat> SAS and SQL, mostly </geek_meat> ).
She really liked her job, and she liked her co-workers.
The turning point for Netbank, IMHO, came after the retirement of one of its founders and a merger with another online bank called RBMG which was located in Columbia, SC (which is, ironically, where we lived before we moved to Atlanta years ago). There were the usual issues of corporate culture which arise during mergers; there were issues regarding differing customer expectations (she ran studies on customer surveys which showed dramatically different attitudes, expectations, and opinions between customers from RBMG and customers from Netbank); there were issues arising from the fact that, although the company retained its Netbank name and identity (and the deal was structured as a Netbank acquisition of RBMG), the center of gravity for the new company was in Columbia, with the former RBMG; and, frankly (again, IMHO), there were issues with RBMG's upper management and corporate strategy.
Netbank "Classic" had been focussed on, and content with, being, well, a bank. Checking and savings, CDs and Money Markets; you know the drill. RBMG, though, had aspirations both grander and farther afield, starting with mortgages (in fact, the "MG" in "RBMG" stood for "Mortgage Group").
That didn't work out too terribly well.
By last year, there were some signs of strain. While the overwhelming majority of folks working in Atlanta and Columbia (and Jacksonville) were really great, and on the ball, there was a bit of a corporate malaise; RBMG ran what seemed to me to be a less employee-friendly operation (one of the first things they did, for instance, was move Netbank's Atlanta HQ from its basic "A" or "B" office space into a semi-crappy converted former retail space which was, at best, a high "C" quality office space). The bad vibe was subtle at first, but it was certainly there; and as the mortgage business began sucking more and more, money got tighter and tighter, and things got less and less functional.
Finally, as last year began to wind down, more and more employees started to jump ship from my wife's group. Eventually, it got to the point where she was more or less forced to jump ship, simply because everyone else already had, and she would be left in department that couldn't possibly do all of the things it was expected to.
By the time she left, right at the end of the year, there was a really grim air about the place; and we got to look on in horror this year as her company stock shares rapidly declined in value to the point where it wasn't even worth bothering to sell them.
We still have a Netbank account with a small amount of money in it, and a lingering bittersweet fondness for the brand and the people who worked for it; but we're certainly not regretting her decision to leave, that's for sure.
Note that credit unions are insured separately by a different organization, so money market accounts there may be covered.
:-) it's worth looking into a credit union.
The federal insurance program which insures credit unions is essentially the same as the FDIC insurance program.
However, for some reason, only credit unions seek out secondary private insurance (at least, I know of no bank that has the secondary insurance.) My credit union has secondary insurance (from these people) that adds $250k to the $100k to make $350k, and it will work for money market accounts.
Moreover, while the federal $100k limit is, as I understand, per person at a bank, the $250k secondary insurance is per account at a bank . So essentially my first account is good for $350k and all my other ones are good for $250k.
If you keep around that much cash (I wouldn't even if I had it...the dollar's taking a whipping now
Then you're a moron. Clinton left Bush with a balanced budget. Bush has not increased entitlements. Ergo, our deficit cannot be caused by entitlements.
However, that's completely irrelevant to what I was talking about. No one here is talking about the financial shape of the government. We're talking about the financial shape of the country.
And we didn't need to vastly increase military spending after 9/11. We could have beaten Afghanistan with one hand tied behind our back.
You seem to think that presidents are relevant to macroeconomic trends. This is a common political delusion, but in the absence of massively stupid legislation(On the level of what has been seen in Latin America), the Federal Reserve bank is the only office with any real power.
Did you read the article I linked to? The Treasury Department, which I assure you the president does control, almost single-handed caused the housing boom because of how they structured their bonds, causing anyone who wanted to invest long term have to do so in real estate. (And, of course, Republicans automatically structure things where investments get less taxes than income.)
And does the phrase 'Ownership Society' not ring a bell anymore? Maybe you should check out who coined that expression and used it repeatedly. The Treasury Department's behavior was not an accident.
Of course, all that we are left with are millions of homes. What use could they serve?
Are you being sarcastic? We've got more homes than people, we've got more going up all the time because of the lag in the market, and quite a bit of them are much too large to operate at a reasonable cost and shoddily enough constructed that the upkeep will be a bitch. Because people stopped judging houses as 'Is this a good fit for me?' and instead asked 'What's the most expensive house I can afford right now as an 'investment'?'.
Yes, in the long run, the houses aren't going to vanish and will eventually get used. OTOH, the excess houses are going to depression the construction market for some time, so look for higher prices there.
Random fads are not a useful way to build material wealth in this country. People suspend their judgment, companies slap together shoddy products that people would not normally want, and then it crashes down and products sit on shelves and houses stand abandoned for years. If people want X amount of something a year, and then suddenly want X3 for a year and then 1/2X for two years, the industry is in a lot worse shape than if they had just kept wanting X a year...half the companies have probably gone bankrupt and a lot of waste occured.
Random fads, OTOH, are a good way to get a lot of research done. Or, for example, convert a lot of homes to be more energy efficent. Or, as the last fad demonstrated, get everyone on the internet.
Really? How exactly could we have done that? Erm...tax breaks? Research grants? Higher taxes on non-alternative energy?
There's a dozen way to do it.
If corporations are people, aren't stockholders guilty of slavery?
I make no claim to any specialized knowledge of economics. I do have a question though. The following tit for tat got me thinking: "What does matter is that we're seeing American financial institutions start to fail, due to the poor health of the American economy." Really? Inflation is low, Unemployment is low, GDP growth is ok. I don't really see how you can define "poor health". Didn't the growth of the housing market, and associated industries play an enormous part in increasing employment(1) as well as raising the GDP (2) in the recent past (1). Wouldn't a crash in the real estate industry have much more far reaching consequences on at least 2 of the 3 indicators that you are pointing to as signs of underlying economic health? I will defer to any expert opinion on this question, it is merely one I couldn't resolve on my own. -iFeden (1) Industry Employment Data produced by the Bureau of Labor Statistics The jump in employment in the housing-related series over the last 13 years is a good measure of the impact of the housing bubble. While overall employment increased by less than 22 percent from the 1993 to 2006, employment in the construction of residential buildings increased by almost 70 percent. Employment in real estate agencies increased by almost 30 percent over this period. Employment in residential specialty trade contractors increased by almost 28 percent in just the years from 2001 to 2006. When the bubble deflates, employment levels in these sectors will fall back in line with their historic patterns, as construction and sales levels move to more normal levels. If employment in housing-related sectors were to fall back to levels consistent with their share of their labor force in the mid-1990s, it would lead a loss of close to 1 million jobs. If the construction sector temporarily falls below its normal level of activity as inventories of unsold homes adjust to normal levels, the job loss would be even greater. -From http://globaleconomicanalysis.blogspot.com/2006/11/housing-industry-employment.html (2) Private Goods and Private Services Sectors Accelerated in 2006 Advance Estimates of Gross Domestic Product (GDP) by Industry Newly available data on the industry distribution of real GDP growth show that the private services-producing sector accelerated to 4.1 percent in 2006, up from 3.7 percent in 2005, and that the private goods-producing sector accelerated to 2.5 percent, up from 2.1 percent in 2005. Real growth in government slowed slightly to 0.6 percent, down from 0.7 percent in 2005. The private services sector's acceleration reflected more rapid growth in "finance, insurance, real estate, rental, and leasing" that offset slower growth in retail trade, information, and "professional and business services." Private goods-sector growth accelerated due to more rapid growth in durable-goods manufacturing and "agriculture, forestry, fishing, and hunting" and smaller decreases in mining and nondurable-goods manufacturing. Real growth in manufacturing accelerated to 3.3 percent in 2006 after increasing 2.2 percent in 2005. This acceleration largely reflected stronger real growth in durable-goods manufacturing of 6.7 percent in 2006, up from 4.9 percent in the previous year. In 2006, durable-goods manufacturing accounted for 6.9 percent of the economy, but accounted for 13.6 percent of real GDP growth. -From http://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm
I've been a NetBank customer for the past few years, and have had decent service from them (though the interest rates on their checking and money market accounts really tanked in the last couple of years). My dad's company had a business account there, however, that turned out to be a nightmare.
When my dad passed away unexpectedly in February, I had to get access to the company's bank accounts. Unfortunately, he was the only signer on the account. It took six months for them to give me access to the money (by closing the account and sending a check), and they still wouldn't give me access to the statements for the account, which I needed to reconcile with our records for tax purposes. I asked them how they were going to send me a 1099-INT (report of interest earned) at the end of the year, and their response was that they would send it to the business address on file. They "couldn't," however, send statements to the address on file. They never could explain the inconsistency. Mind you, this communication happened after I had already proved to them that I was the Personal Representative of the estate, which had 100% ownership of the business. They would take weeks to return phone calls, and never responded to lawyers' inquiries sent via certified mail.
Good riddance, NetBank.
Other banks have already closed because the owned too many rotten mortgages, including (for example) Greenpoint Mortgage. Greenpoint was owned by a larger, full-service bank, but that distinction wasn't made in this article. As usual, journalists like to portray Internet business as unusual, fly-by-night, and inherently risky in a way that non-Internet businesses of the same kind somehow are not.
--
make install -not war
Inflation has been roaring during the past decade, but masked by cheap imports and temporary absorption of the money used to pay for those cheap goods.
True unemployment is sky high, around 50% by historical metrics. The government unemployment numbers were redefined to ignore people are barred by law from employment and people who are unable to find employment. The government has also ratcheted up efforts to legally ban more people from employment.
GDP growth has likely been stagnant or recessionary, but masked by the enormous churn in the financial and construction industries.
Many Americans lack the IQ needed for intellectual jobs, but have more than enough willpower, dexterity, and social skills to be useful. When their jobs are shipped to foreign countries, they are reduced to a combination helpless dependency and pointless make-work. This is dangerously corrosive to the great strengths of American culture.
You are failing to consider eurodollars: US dollars lent out by foreign organizations at extremely high reserve ratios. It would not take much market panic** to cause a liquidity crunch. The Fed could not tide over the institutions that wrote eurodollar contracts because they are foreign, and the local central banks cannot help because the contracts are denominated in non-local currency. Rock, meet hard place. The high leverage also means the Fed doesn't have to work as hard to affect the money supply, making money supply operations less painful to Americans.
**I wonder how many eurodollars were spent on purchasing low-quality US mortgage-backed securities? Human folly being what it is, I'd expect rather more than is comfortable.
To whitewash these issues, the Fed decided to stop reporting M3 in November 2005. (M3 was the only money supply measure that included eurodollars.) They read the writing on the wall two years ago.
well, if you're in L.A. you should check out these homes, look pretty good and the prices are just about right.
http://www.youtube.com/watch?v=2fsR5hBS0tM
"Sorry about the adhoc tutorial on credit."
Don't be sorry. It's excellent.
MOD PARENT UP!
I've usually had a through-the-roof credit score--when we bought the van, it was the second highest that the internet sales manager had *ever* seen (and the other wasn't when involved in cars). Until we bought that van, I had zero debt other than student loans, and a credit score way past 800. As an assistant professor.
I don't quite make three times as much now, but I have a rather substantial amount of revolving credit and another car loan (the van paid off 2 years ago). That debt, though, is at rates ranging from 0% to 3.99%. I could write a check and pay it all off--but it's the reason that my credit score is almost 200 points lower today. When I'm getting better than 5% on my Vanguard money market account, that makes no sense, though. (And much more in my other funds).
I'm a much better risk now, but the score doesn't cover that. It is almost (entirely?)oblivious to income and assets, but does look at the absolute amount of debt.
hawk
Why did all of the NetBank deposits go to ING?
They don't grade fathers, but if your daughter's a stripper, you fucked up. --Chris Rock
They will not automatically lose all uninsured funds. You will see that the FDIC has already authorized payment for 50% of the uninsured funds out of the expected proceeds from the sale of the loan assets. (The deposits were purchased by ING, but not the loans.) The FDIC also states that they expect further dividends beyond the 50% will be made available as things wind down.
While the folks with uninsured assets will lose a bit, it won't be the end of the world.
SirWired
He's not being sarcastic, he's a right-wing lunatic.
One that curses big government when it's a democrat doing it, and praises it when an order of magnitude more is spent to blow up some brown people. One that blames Clinton for all things evil, but claims Bush is powerless to stop anything bad at all.
Don't bother reasoning with him. DavidShor is a far-gone, fact-free, idiotic, right-wing loser. He will only agree with you if the GOP tells him to do so. His only purpose in life is to remind others of how gullible and stupid people can be. He is incapable of intelligent debate, because he is incapable of recognizing truth.
But really, we have to be realistic. Shouting "BUSH SUCKS" at the top of our lungs does not accomplish anything. While I am incredibly disappointed with the events of the last 7 years, I want to analyze the real causes, and pinpoint blame to the right people, to ensure that the mistakes of this decade are never repeated.
OK that late in life you have a point. But I wouldn't have all my eggs in one basket ... diversify your products!
Actually, Bush has raised entitlement spending more than any president since Johnson. The biggest offender is the prescription drug plan, but that is just one part of his "Compassionate Conservatism".
"And we didn't need to vastly increase military spending after 9/11. We could have beaten Afghanistan with one hand tied behind our back."
I didn't say we needed to, I said that after 9/11, the public wanted to spend more on the military.
"Did you read the article I linked to? The Treasury Department, which I assure you the president does control, almost single-handed caused the housing boom because of how they structured their bonds, causing anyone who wanted to invest long term have to do so in real estate. And does the phrase 'Ownership Society' not ring a bell anymore? Maybe you should check out who coined that expression and used it repeatedly. The Treasury Department's behavior was not an accident."
Which explains why real estate prices spiked in a bunch of other countries too?
All the article says the treasury department did was eliminate the 30-year treasury note, claiming that this made long-term investment impossible without real-estate. This is absurd, anyone investing in real-estate is expecting far larger returns than a 30 year would give. Not only that, but CD's and Municipality bonds are close substitutes for the 30 year note.
The 30 year note was taken down in anticipation that we would enjoy a permanent surplus, shame that didn't work out. But don't apply any conspiracy theories.
"And, of course, Republicans automatically structure things where investments get less taxes than income."
We have to, to keep all of Wall Street from moving to London. They also have a giant financial industry, and a capital gains tax of 10%. Is this distorting? Of course, but we generate more tax revenue than if we equalized rates(And no, I don't support Laffer curve bullshit, so don't set up a straw man).
The best solution is to move to a consumption tax. Instead of taxing income that people make, you tax what people spend. The effects are a bit regressive, but you can overcome that with a tax rebate.
"Erm...tax breaks? Research grants? Higher taxes on non-alternative energy? There's a dozen way to do it."
So far, government attempts to do all of that have been subverted into bipartisan pork competitions. I don't really believe that our government is capable of doing such a complicated and nuanced thing, at least not with our current constitutional system.
tomorrow night like the site states. my freakin mortgage payment is supposed to be transferred to on monday :/ i'm just gunna move everything to my local bank for the time being. thank goodness i moved most of my money to Countrywide Financial earlier this year.
"The FDIC will retain the remaining $1.1 billion in assets for later disposition, including NetBank's leasing division, NetBank Business Finance, which will continue operations," the FDIC said. "Loan customers should continue to make payments as usual."
~WELCOME TO JEKYLL ISLAND~
I've been reading a lot about the FairTax and the idea of a sales tax to replace income tax. But I'm not sure why a lot of people think a well-written sales tax is better than a well-written income tax. I look for the pros and cons of the two systems without people pointing at specific implementations.
"That which does not kill us makes us stranger." -Trevor Goodchild
When you get to 8, let me know, because you'll be eligible for upgrading to suicide bomber.
--
make install -not war
Actually, Bush has raised entitlement spending more than any president since Johnson. The biggest offender is the prescription drug plan, but that is just one part of his "Compassionate Conservatism".
The prescription drug program didn't give anyone entitlements except the drug companies.
If you meant he raised spending, yes, I know. Pretending it's caused by 'entitlements' when it's actually an expansion of the military and corporate welfare is just deceitful.
Which explains why real estate prices spiked in a bunch of other countries too?
Yes, they spiked and went down in some places, and went up in some places, went down in some places. Pretending the housing bubble is a global problem is idiotic. Nowhere else on the planet saw home prices double in the last eight years.
All the article says the treasury department did was eliminate the 30-year treasury note, claiming that this made long-term investment impossible without real-estate. This is absurd, anyone investing in real-estate is expecting far larger returns than a 30 year would give. Not only that, but CD's and Municipality bonds are close substitutes for the 30 year note. *sigh* The government influences the market in many ways. One of those ways was to remove certain bonds for investment purposes.
And I notice you didn't respond to my 'Ownership Society' mention. Bush went up there in 2004, boasting how home ownership was high and talking about the 'ownership society', etc, etc, at a time that anyone with the slightest bit of knowledge could see we were in a bubble and encouraging people to buy a house at that moment was stupid. He did that because his economy was based on housing prices.
It might be possible that the government helping the bubble was an accident only if we didn't have them standing up in front of everyone and promoting 'investing' in that bubble.
The best solution is to move to a consumption tax. Instead of taxing income that people make, you tax what people spend. The effects are a bit regressive, but you can overcome that with a tax rebate.
The best solution for what? What fictional problem are you looking at? How on earth could taking consumption help the housing market? (Unless you're including taxing houses, which are not normally included in 'sales tax' proposals.)
So far, government attempts to do all of that have been subverted into bipartisan pork competitions. I don't really believe that our government is capable of doing such a complicated and nuanced thing, at least not with our current constitutional system.
Our government, OTOH, is perfectly capable of slowly raising the taxes on heavy-gas-using cars, and providing rebates to help defray the cost of hybrid cars, for example. I'd suggest higher gas taxes, putting gas in the range somewhere of 2-3 dollars a gallon, except the current government has managed to do that fairly accidentally. Higher taxes on high MPG cars is fairer to consumers, anyway...they'll know what they're getting into when they buy it.
Or putting solar on top of their buildings. And, yes, we'd have idiots argue it wouldn't save money, when the point isn't to save money, or even energy. It's to help cover research and production-startup costs. We spend 80 dollars a panel so they can build big factories and then sell them to people at 25 dollars a customer, because people won't buy them at 80 and the first million are going to cost that much.
The government shouldn't run around funding research. The government should set up taxes and rebates to encourage companies to do research themselves, because it's less expensive than not doing it. It should be buying the results, even if it costs more than it saves right now, to encourage development.
If corporations are people, aren't stockholders guilty of slavery?
I was getting nostalgic recently since I used to work for NextCard, and was wondering how the other online banks were doing like NetBank and VirtualBank... and was surprised they were both still in business. I was also checking on other online banks.
Anyway, I think E*Trade is probably the best one out there. If you have direct deposit, you can set up a Max-Rate Checking account and won't have to worry about paying any fee if your balance is too low. They give you 0.5% APY for balances under $5000, and I think 4% for above that.
The best thing though is you get unlimited ATM fee refunds from other banks' ATMs, and E*Trade doesn't charge any ATM fee... so you're basically free to use any ATM you want.
Yes, it was a rather disgusting corporate welfare program. Regardless, senior citizens received drugs they would have had to pay for, so I count it as an entitlement. Semantics aside, the deficit is due mostly to growth in these programs.
"Yes, they spiked and went down in some places, and went up in some places, went down in some places. Pretending the housing bubble is a global problem is idiotic. Nowhere else on the planet saw home prices double in the last eight years."
Really?
http://en.wikipedia.org/wiki/Russian_property_bubble http://en.wikipedia.org/wiki/Romanian_property_bubble http://en.wikipedia.org/wiki/Indian_property_bubble http://en.wikipedia.org/wiki/Chinese_property_bubble http://en.wikipedia.org/wiki/Spanish_property_bubble http://en.wikipedia.org/wiki/Spanish_property_bubble http://en.wikipedia.org/wiki/Irish_property_bubble http://en.wikipedia.org/wiki/British_property_bubble http://en.wikipedia.org/wiki/Danish_property_bubble
Those are just the ones with Wikipedia articles. In each of those countries, median home prices have doubled in the last 8 years, in most of them, the increase was far larger. Real estate prices have spiked by enormous amounts in nearly every country in the world (Japan is a notable exception; prices are still level from their boom in the 90's).
"The government influences the market in many ways. One of those ways was to remove certain bonds for investment purposes."
You vastly over-estimate the effect of the removal of the 30-year note. As I said earlier, the 30-year note had many close substitutes with essentially identical risk and return (FDIC insured CD's and state bonds for example).
Even without substitutes, the 30-year note was for very conservative investors. The idea that by removing one ultra-safe investment option, investors will suddenly pour funds into risky real estate is absurd.
"And I notice you didn't respond to my 'Ownership Society' mention. Bush went up there in 2004, boasting how home ownership was high and talking about the 'ownership society', etc, etc, at a time that anyone with the slightest bit of knowledge could see we were in a bubble and encouraging people to buy a house at that moment was stupid. He did that because his economy was based on housing prices."
The "Ownership Society" was a political buzzword used by George Bush to capitalize on a trend. You have failed to provide convincing evidence that this was anything more than an empty slogan. Anyone with enough cash or credit to buy a home should know better than taking financial advice from a politician.
"The best solution for what? What fictional problem are you looking at? How on earth could taking consumption help the housing market? (Unless you're including taxing houses, which are not normally included in 'sales tax' proposals.)"
The best solution for attracting foreign investment without distorting the economy. I would support taxing houses though, along with all other economic transactions. As for its effect on the housing market? I do not think it would have one, I was responding to your complaint that dividends are taxed differently than incom
If you think Gore would have managed the economy any better after 9/11, I've got a bridge to sell you (or should I say a Miami condo).
For those who actually followed financial news, the recession really began in the summer of 2000. Its effects just became noticeable after 9/11 when companies completely stopped hiring and in many cases began massive layoffs. For the tech industry, 2002 was a great depression.
Alternative energy bubbles have come and gone over the years, and will never be enough to save the entire national economy.
One motivation behind it is that foreign investors have essentially zero tax obligations under a sales tax. The theory is that nearly every corporation in the world would relocate here.
Another thing to keep in mind is that the two tax systems cause deadweight loss(economic damage caused by taxes that does not go to the government) in different ways.
Sales taxes cause deadweight loss by raising the price of a good, prompting consumers to buy less of the good. This new level of purchase is less than optimal, and a certain amount of utility is lost by both the consumer and the seller(there are nice graphical explanations of this in any microeconomics book). The precise level of deadweight loss is related to how much the tax changes purchasing behavior, and is determined by the price elasticity of a product.
Income taxes leave people with less money, causing them to buy less goods. Not only that, but it causes them to buy goods in smaller amounts(The classic example is that as people get richer, they buy more meat). This causes decreased utility for sellers and buyers. The precise amount of loss depends on the income elasticity of a good, along with a couple of population variables.
Keep in mind, deadweight loss is completely different that government revenue. The money does not go to the government, but simply disappears, lowering the countries possibility curve.
Many Economists suggest that income taxes cause a larger deadweight loss per unit of revenue than sales taxes.
That's just a show-measure, designed to make people feel good. Besides, the definition of "heavy-gas-using cars" is very sketchy, expect it to be distorted beyond belief in a congressional hearing.
"providing rebates to help defray the cost of hybrid cars"
Batteries require a tremendous amount of energy to create, unless the car is driven very often, this is often more energy than is saved. And hybrids are not nessiarily better for the envirement, they simply boost performance per gallon. Many hybrid cars just boost performance, keeping poor mialege(see the lexus models.)
"I'd suggest higher gas taxes"
Gasoline is highly price-inelastic. Prices would have to be raised to tremendous levels in order to signifigantly effect consumption(far more than the $2-$3 per gallon you are talking about). Not only that, but it would harm poor people rather severely, along with increasing inflation.
Before you mention Europe, keep in mind that they do not have a gasoline tax out of "energy independance" concerns. They have their tax purely for revenue, Gasoline is very price inelastic, just like cigarettes and Booze. Basic economic theory shows that such commodities are the best to tax(if you must tax at all), as they produce the most revenue and cause the least deadweight loss.
Europe is every bit as Dependant on the rest of the world for oil and natural gas as we are. In fact, because of their particular infrastructure, they are more so. So if energy security is your concern, don't look to them as a shining beacon.
"Or putting solar on top of their buildings. And, yes, we'd have idiots argue it wouldn't save money, when the point isn't to save money, or even energy. It's to help cover research and production-startup costs. We spend 80 dollars a panel so they can build big factories and then sell them to people at 25 dollars a customer, because people won't buy them at 80 and the first million are going to cost that much."
Any step forward in solar cell technology is going to be done by grad students working for a VC. How exactly are the profits of giant corporations funneled to them? I'm concerned that such subsidies distort funding away from original technologies that have not been considered.
Before we decide what are our goals. Is your goal achieving energy independence, or mitigating global warming? I am personally unsympathetic to the first goal, and very enthusiastic about the second. But they have nothing to do with each other, and I would like you to clarify your goals before I move on.
Meanwhile, I received a fairly large payment from a customer... What I should have done is just held on to this check until the new account was ready. But I thought that the big check I had written to fund the new account would post soon, keeping me under the limit even with the new deposit. So I deposited the customer's check to the doomed NetBank account.
Well, NetBank received the deposit and it posted to my account, while in the meantime the new bank was slow to process my application and didn't cash the check. Ironically, the new bank phoned me on Sep 27 to ask a question or two and then said they would be opening the account right away. As you can guess, they didn't post the check in time and at the end of the day my account was still over the $100k limit. Oops, lesson learned.
Thinking back, there are other occasions in my life where I have briefly had more than $100k in a single account. For example, when you sell a house it is common practice to have the proceeds wired to your bank account. Then you might keep them there until the next house you are buying closes escrow (usually in a few weeks) or maybe move them to a longer term investment account (say within a few days). During this window you are vulnerable to a bank failure. Let's say that on average you buy or sell a house once every ten years and keep the money in a bank account for just 7 days. That means that about 0.2% of the time you will have A LOT of money in your account. Looking at it from the bank's perspective, about 0.2% of their customers will be going through a life event like this on any given day. I read in the news accounts that ING Direct acquired 110,000 new customers and that 1,500 customers had accounts with some uninsured funds... that's more than 0.2% but still doesn't surprise me.
Interesting. I hadn't heard that.
I believe the last oil producing country to consider pricing in Euros rather than dollars was Iraq, who appear to have been thoroughly dissuaded now.
I'd always cynically assumed the real reason for the Iraq war was to avoid a run of oil suppliers switching to the Euro, and a subsequent dumping of dollars previously held onto the market, resulting in a fall in the value of the dollar.
Way to go on that one guys.
Yes, everyone knows that. We would have had a recession in 2002-2003 without something to stop.
Bush decided to fix it with a goddamn housing bubble. This was less than useful, as it is leading the way to a full-scale economic collapse.
The point isn't to 'save' the economy, the economy could have got through the tech crash eventually, the point would have been to cushion it while it happened. Look at the 80s crash.
Encouraging people to purchase overpriced houses they can't afford is pretty much the opposite of 'cushioning'. In fact, it's a good way for a lot of people to end up homeless, and cause another actual depression.
If corporations are people, aren't stockholders guilty of slavery?
Yes, it was a rather disgusting corporate welfare program. Regardless, senior citizens received drugs they would have had to pay for, so I count it as an entitlement. Semantics aside, the deficit is due mostly to growth in these programs.
Medicare drugs now cost more. If you want to include that as an entitlement increase, go ahead and live in your own crazy universe.
Those are just the ones with Wikipedia articles. In each of those countries, median home prices have doubled in the last 8 years, in most of them, the increase was far larger. Real estate prices have spiked by enormous amounts in nearly every country in the world (Japan is a notable exception; prices are still level from their boom in the 90's).
First off, there is no Russian or Romania or Indian or China housing bubble, despite the fact there's a Wikipedia article with that name. Russia might have a Moscow bubble, but, OTOH, their property is way out of sync of the reast of Europe. Romania just invented home loans, before that, no one could actually afford to own a house.
India and China, OTOH, are in the middle of a huge income increase, prices are not increasing alone, income is increasing. The fact that people can now afford to live in real houses instead of hovels is not a 'bubble'.
Europe, OTOH, actually is in a bubble. Why? Because our investment greatly influences theirs, and our government influence theirs.
More to the point, you'll notice that most of their bubbles and slowed in 2006 or 2005, and started a year or so after ours. (Ours actually started in 2000 or even 1999, although no one really noticed.) Why? Because those countries figured out how dangerous it was and stopped it!
You vastly over-estimate the effect of the removal of the 30-year note. As I said earlier, the 30-year note had many close substitutes with essentially identical risk and return (FDIC insured CD's and state bonds for example).
Even without substitutes, the 30-year note was for very conservative investors. The idea that by removing one ultra-safe investment option, investors will suddenly pour funds into risky real estate is absurd.
Except they did.
And you're overempashising the example I gave. There were a lot of tiny things that the government did to encourage it, and there were quite a lot of things the government could have done to stop it. (I, unlike you , don't think the government should let the free market drive itself off the cliff, even if it chooses to do so of its own free will. And it certainly shouldn't do anything to encourage it.)
The "Ownership Society" was a political buzzword used by George Bush to capitalize on a trend. You have failed to provide convincing evidence that this was anything more than an empty slogan. Anyone with enough cash or credit to buy a home should know better than taking financial advice from a politician.
And, once again, the right is forced to fall back on 'It's not malice, it's incompetence'.
Bzzzt, wrong. If oil prices had remained steady, the housing boom would still be happening, and it would happen all the way to the next president, who would get hit with the collapse, which at that point would be even worse. That was what was supposed to happen.
It's incompetence it's happing now, but it was with malice Bush encouraged it. Did you know that, of the jobs created under Bush, about a third of them are related to the real estate market, mostly as a realtor or construction worker? It sure looked nice as a statistic in job creation, and hey, the next guy was going to have to deal with all those unemployed workers when the bubble crashed.
If corporations are people, aren't stockholders guilty of slavery?
That's just a show-measure, designed to make people feel good. Besides, the definition of "heavy-gas-using cars" is very sketchy, expect it to be distorted beyond belief in a congressional hearing.
Um, no, it's already been distorted. What needs to be done is to undistort it.
Batteries require a tremendous amount of energy to create, unless the car is driven very often, this is often more energy than is saved.
Jesus Christ. Here's me: 'And, yes, we'd have idiots argue it wouldn't save money, when the point isn't to save money, or even energy. It's to help cover research and production-startup costs.'
I can't argue with this sort of bone-deep stupidity. Granted, I was talking about solar panels, but anyone could figure out the same applies to hybrid cars. We can wait 20 years for this industry to grow enough to be economically feasible, relying on early adopters to pay the cost, or we, in the form of the government, can pay the early-adopter cost and get it reasonable now. (Which also would cause a economic boom, and make a lot more sense than damn overbuilt houses, or a stupid-ass war.)
Whether or not we should do it to reduce energy consumption is a valid question, but I wasn't postulating it for that. I was saying that if we're going to have a government sponsored bubble, we should do it in something that's actually useful in the long run, even after the bubble goes away.
Gasoline is highly price-inelastic. Prices would have to be raised to tremendous levels in order to signifigantly effect consumption(far more than the $2-$3 per gallon you are talking about). Not only that, but it would harm poor people rather severely, along with increasing inflation.
I was talking about raising them to 2-3 a gallon, which, obviously, makes no sense anymore, but doesn't appear to hurt poor people that much. But that's exactly why I proposed a tax on new cars instead of on gas.
Europe is every bit as Dependant on the rest of the world for oil and natural gas as we are. In fact, because of their particular infrastructure, they are more so. So if energy security is your concern, don't look to them as a shining beacon.
I'm pretty certain I didn't mention Europe at all, and actually, you're wrong. Europe uses a lot less gas per-person. They have tiny little cars exactly because gas costs so much, and they use mass transit a lot more because they actually build mass transit and thus can get everywhere using it.
But, hey, there's yet another thing we could have done. Instead of building houses, we could have build mass transit.
Any step forward in solar cell technology is going to be done by grad students working for a VC. How exactly are the profits of giant corporations funneled to them? I'm concerned that such subsidies distort funding away from original technologies that have not been considered.
As opposed to now, where big oil is in charge of funneling research?
Before we decide what are our goals. Is your goal achieving energy independence, or mitigating global warming? I am personally unsympathetic to the first goal, and very enthusiastic about the second. But they have nothing to do with each other, and I would like you to clarify your goals before I move on.
Ah, I see. You like big oil.
Well, no point in trying to convince you of anything.
If corporations are people, aren't stockholders guilty of slavery?
No, they did not. The same risk taking investors who placed their money into the dot-com bubble, invested their money into housing after the bubble burt. After the housing market cooled down, they invested in commodities, creating a boom there.
Institutional investors who previously invested very conservatively, continued to.
"And you're overempashising the example I gave. There were a lot of tiny things that the government did to encourage it, and there were quite a lot of things the government could have done to stop it."
Your article did not mention them, so please elaborate on these other "tiny" things. And also, elaborate how you would have stopped the housing boom.
"Bzzzt, wrong. If oil prices had remained steady, the housing boom would still be happening, and it would happen all the way to the next president, who would get hit with the collapse, which at that point would be even worse. That was what was supposed to happen."
No, housing prices really couldn't have gotten higher than they did. Investors realized that it was a bubble, and pulled out.
Don't you think that it's a little absurd that one of the most incompetent presidencies in history successfuly orchestrated the movement of trillions of dollars by ingenious and unnoticeable micro-prods, and yet fail to realize that invading a oil rich country will increase the price of oil?
"More to the point, you'll notice that most of their bubbles and slowed in 2006 or 2005, and started a year or so after ours. (Ours actually started in 2000 or even 1999, although no one really noticed.) Why? Because those countries figured out how dangerous it was and stopped it!"
I don't really see what measures their governments have taken to "stop it". The ECB has a stronger anti-inflation mandate than the Feds, and raised rates faster than we did.
If you are talking about oil company subsidies, isn't eliminating them a better solution? Further distortion to cancel out distortion seems inefficient. And I realize that these subsidies include asset protection in the middle east, I am willing to stop that too.
"Granted, I was talking about solar panels, but anyone could figure out the same applies to hybrid cars. We can wait 20 years for this industry to grow enough to be economically feasible, relying on early adopters to pay the cost, or we, in the form of the government, can pay the early-adopter cost and get it reasonable now."
Hybrid cars are not going to get any more efficient without a major breakthrough in battery technology, something that billions of dollars in research already goes toward from other industries.
I find it doubtful that much of the extra revenue this would generate for battery and solar cell manufacturers will go to research. I don't see why they would have an incentive, in fact, it is rather possible that they would divert money from research to production, to meet artificially inflated demand.
This will increase experience and possibly decrease production costs for solar cells, but not by much(if the effects were large enough, they would have gotten a private loan). Besides, current conventional solar and battery technologies are fundamentally unworkable, and cannot possibly scale to take oil's place.
The entirely new type of solar cell or battery that can replace oil, that would have been funded by research, which was most likely diverted to meet production.
"I was talking about raising them to 2-3 a gallon, which, obviously, makes no sense anymore, but doesn't appear to hurt poor people that much. But that's exactly why I proposed a tax on new cars instead of on gas."
Cars are durable goods, and can last much longer than consumers usually own them. A tax on new cars would simply prompt people to keep their old cars for a longer period of time. Luxury cars are different of course, but they are rather price-inelastic, so I don't think a tax would be anything more than a revenue grab.
"I'm pretty certain I didn't mention Europe at all, and actually, you're wrong. Europe uses a lot less gas per-person. They have tiny little cars exactly because gas costs so much, and they use mass transit a lot more because they actually build mass transit and thus can get everywhere using it."
Just because they use less gas per person does not mean they are less dependent on foreign oil and natural gas imports. They consume nearly five times as much oil as they produce. In fact, they would be hurt more by an oil shock than us, because they have already taken up every measure to conserve oil, there is nothing else they can do to cut down usage. Because of this, Europe is just as sensitive to political threats from oil producing countries as we are, despite all of these anti-consumption measures.
"As opposed to now, where big oil is in charge of funneling research?"
The current system sucks tremendously, but it is rather possible that your system could suck even more.
My solution would be to set of a carbon cap and trade scheme. Every year the government would auction off carbon credits, the total number auctioned would be determined by climate scientists. These credits would be transferable, and would ensure that the carbon that we do produce goes to the most profitable use possible.
Most importantly, companies would have a direct incentive to research in cleaner technologies. Since gasoline is rather polluting, I imagine this would prompt some movement away from fossil fuels as well.
"Ah, I see. You like big oil."
No, I couldn't care less about them. I just don't see reducing oil importation as a valid goal. We import lots of things from the rest of the world, Cars, Chocolate, and Sugar. I don't see how oil is any different. What exactly are the costs to society of burning oil?(other than pollution, as I previously stated I want that to be accounted for).
No, they did not. The same risk taking investors who placed their money into the dot-com bubble, invested their money into housing after the bubble burt. After the housing market cooled down, they invested in commodities, creating a boom there. Institutional investors who previously invested very conservatively, continued to.
And people who needed to purchase houses had to purchase marked up ones, and bought even bigger than they needed as 'investments'.
I don't give a fuck about people who invest professionally. They can take care of themselves. It's people who see the bank giving an interest rate of 3% and property values raising 15% a year who got hit, and were repeatedly told 'home values never go down' and 'homes are an investment' that went out and bought a home that was already overpriced by 50%.
Why were the banks giving such low interest rates? Because of the government's monetary policy. Why were property values rising so quickly? Because of the government's complete non-interference.
And even people who didn't fall for the idiocy were still effected, because they have to have a place to live. It's all well and good to say people can opt out of the stock market, even though that's not true because of pension plans and whatnot. No one can opt out of the housing market. (And, yes, the increase in home prices also raised rents and leases. Although renters, at least, won't be hurt by the drop.)
Your article did not mention them, so please elaborate on these other "tiny" things. And also, elaborate how you would have stopped the housing boom.
I would stopped promoting home ownership, for the most obvious one!
Other than that, let's see: Tightened controls on the mortgage industry so there wasn't so much money being thrown around. Changed tax code to penalize flipping.
And I'd have encouraged local government to de-emphasize more residential zoning, and have impact fees for new hours, and to increase property taxes for higher-priced houses.
The tiny things? Well, Bush did almost exactly the opposite of all those. (Although he didn't really have to work locally, he knew local Republicans would automatically fight impact fees and increased property taxes and zoning.)
No, housing prices really couldn't have gotten higher than they did. Investors realized that it was a bubble, and pulled out.
Sure they could have gotten higher...if oil prices had been lower. That's what made the wheels fall off this little ride...people couldn't pay for their gas and their mortgage. (And their food, but food prices follow right behind gas prices.)
Don't you think that it's a little absurd that one of the most incompetent presidencies in history successfuly orchestrated the movement of trillions of dollars by ingenious and unnoticeable micro-prods, and yet fail to realize that invading a oil rich country will increase the price of oil?
The theory is that by now, in fact, by 2004, we'd have control of their oil wells. No, not that we'd take over and run them ourselves, but that they'd be selling cheap to us. Remember how the oil was supposed to pay for the war?
If the Iraq war had worked, we'd be rolling in 75c gas right now, and people would be driving 60 miles a day in their Hummer earning $40,000 a year to pay off their $260,000 house, and that would actually work. At least for another 18 months.
And even if you think it wouldn't work another 18 months even with cheap oil, that was still the plan. It's possible that even without oil going up, the plan would have failed, but arguing that a Bush plan would have failed for multiple reasons or was insanely optimistic about the behavior of others is not a very useful objection to the idea that such a plan exists.
If corporations are people, aren't stockholders guilty of slavery?
If you are talking about oil company subsidies, isn't eliminating them a better solution? Further distortion to cancel out distortion seems inefficient. And I realize that these subsidies include asset protection in the middle east, I am willing to stop that too.
No, I was talking about the distortion of the MPG controls by including SUVs as 'light trucks' instead of passenger cars.
We already have perfectly functional ways of reducing low-mileage vehicles on the road, it's called CAFE. It and things like it upped gas mileage from 20 mpg to almost 35 over the last three of decades. We just stopped using them.
I find it doubtful that much of the extra revenue this would generate for battery and solar cell manufacturers will go to research. I don't see why they would have an incentive, in fact, it is rather possible that they would divert money from research to production, to meet artificially inflated demand.
Solar panels don't actually need a lot of research at the moment. They just need a price drop. Get them out in the public, installed on buildings, and the research to make them better will happen by itself.
And the government using hybrid cars would, indeed, cause battery research as the government tends to lease cars from manufacturers. They don't want to end up with a bunch of five-year old cars with non-working batteries they have to replace. However, I'm not as attached to this idea as the solar panels...but I do think it would be helpful for the government to use only cars that exceed CAFE by, say, 15 mpg (And only then get the lowest bid.) to help drive the market.
Just because they use less gas per person does not mean they are less dependent on foreign oil and natural gas imports. They consume nearly five times as much oil as they produce. In fact, they would be hurt more by an oil shock than us, because they have already taken up every measure to conserve oil, there is nothing else they can do to cut down usage. Because of this, Europe is just as sensitive to political threats from oil producing countries as we are, despite all of these anti-consumption measures.
Um, no. I don't know in what universe Europe is more unable to cut back on oil than us, but it isn't the one I live in. Europe tends to have rail service to almost every small city, or at least within 20 miles of every small city. They may do a lot of shipping over roads, but they could certainly switch that to rail in an emergency.
Read a Sherlock Holmes story. 100 years ago, England was crisscrossed with enough rail service that you could get anywhere in a day, and Europe was the same. Those rail lines are still there, and still used for commuter services, although obviously they run a good deal less trains over them.
We, OTOH, can't ship food using rail outside of major cities, because we don't have any rail lines at all except between ports and major cities. (And we don't get food from ports, we get it from 100,000 square miles of farmland.)
If corporations are people, aren't stockholders guilty of slavery?