May 25, 2008
House Of Cards: The Mortgage Mess
60 Minutes Reports On How The Subprime Loan Crisis Is Shaking Markets Worldwide
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The U.S. Mortgage Meltdown
Steve Kroft reports on the U.S. sub-prime mortgage meltdown, in which risky loans drove a housing boom that went bust, and how this crisis is now roiling capital markets worldwide.
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Credit Crunch
Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
The Wall Street and foreign investors are now stuck with the millions of distressed properties on Sean O’Toole's map, the unsold condos in Miami, the unfinished apartments on the Vegas Strip, the developments in Atlanta that are sitting idle and the thousand stucco houses in Stockton. Not even Kevin Moran, who has copies of the foreclosed mortgages, can figure out who exactly owns them.
"That’s the fascinating part of this whole debacle we’re in. Mortgages are sold in mortgage backed securities, so they’re pooled. I’ve seen everything from some of the largest financial institutions in the country, and you see 'Deutsche Bank' in a series and a series of numbers and letters to a mortgage pool," he says.
The pools are part and parcel of those high-yield mortgage backed securities everyone gobbled up a few years ago, and are now stuck in the windpipe of the world's financial system. No one wants to buy them, so no one can sell them.
"Bonds marked triple-A are now quoted at 50 cents to the dollar, 40 cents on the dollar. Some of them, much less," Grant says.
"How much on the dollar, do ya think?" Kroft asks.
"Some of them are worth nothing on the dollar. Nothing on the dollar. This is the worst thing that has happened to Wall Street in a long time," Grant says.
Asked how many of these securities are out there, Grant says, "A trillion with a T-plus."
Asked who bought them and owns them, Grant says, "You know, state pension funds, the hedge funds bought them. Foreign central banks own some of these things, if you please. So the ownership is very widely dispersed, which accounts for the general anxiety, and the persistence of anxiety."
There’s already a two-year supply of properties on the market in Stockton and so many foreclosures that real estate agent Cesar Diaz decided to start the "Repo Bus" to take bargain hunters and bottom feeders on a weekly tour to see some of them. He got the idea from the Hollywood tour of the stars' homes.
The day Kroft went along, there were two busloads checking out houses that are now 70 percent cheaper than they were when the crisis began. The consensus seemed to be prices are going to drop still further. Not particularly encouraging news for the past two chairmen of the Federal Reserve Board.
"Alan Greenspan and his successor, Ben Bernanke, would say over and over that it's contained. The problem's contained. It turns out, it is contained only on planet Earth," Grant says, laughing. "That's it."
One hundred of the world's biggest financial institutions now are on the hook for a reported total of $379 billion in bad debt - and counting.
As for Stockton, it remains the nation's foreclosure capital, with more than 6,000 homes currently in default or foreclosure.
Produced By L. Franklin Devine and Jennifer MacDonald
© MMVIII, CBS Interactive Inc. All Rights Reserved.
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See all 303 CommentsTyco take us for a loop. Now the high priced bankers want their share. The bankers should watch "It''s a Wonderful Life" at least once a week. Lending money should be rather simple and not become a high stakes poekr game.
I can we had no problems before homecomings financial bought the loan. AS soon as our 2 yers were up. They immediately upped the payment, would not answer phone calls, take payments and hold them in "suspense" claiming we were short and not credit them. It was expained to us that the APR was what the current interest rate was in that year and could be changed annually
It is the the fault of greedy, fly by night mortgage comapies. They know your income and make it impossible for you to meet the payment. They know they are forcing you into a foreclosure!!!!!!!!!!
Now they want to cry foul of the mess they have caused.
I wish stupid politicians would watch to understand there is no quick fix to this. This was mortgage fraud gone wild. As a reader of Ben Jones Blog for a couple of years many of us warned that this was happening. Somehow it was thought that everyone should own a home regardless if they could afford it. In CA some farm workers with $20k income bought $700k homes and put money in their pocket at closing. Brokers and everyone made money and everyone looked the other way at this fraud.
We should go into a depression to clean this mess up. But washington politicians think they should use my tax money to bail everyone out. We need to fight to prevent this.
These same issues are happening in Spain, UK and several other countries throughout the world. There was a GLOBAL housing bubble because of GREED. It was not only related to the US and not only related to blacks, hispanics and poor whites. Quit playing your race/class card! The only color that was the problem in this debacle is the color green.
Ireland is also going through the same problems.
Re: "Steve Kroft Reports How The Mortgage Meltdown Is Shaking Markets Worldwide"
You read it here first- not from Steve Kroft, 60 Minutes, or CBS Newz, of course, but right here in the comments section, moths ago. This was predictable and was predicted.
CBS has a lot of catching up to do. The real estate meltdown is bound to get much worse, before it gets better.
Ireland is also going through the same problems.
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Posted by whatithink at 08:28 PM : Jan 27, 2008
+ report abuse
Really? Does the Government have the same problems? It''s hard to imagine another country with a leader and a political party as Incompetent as Bush and the Repubican''s. When you look at what they were handed and were we are it takes the breath away. Going from a Balanced Budget and a Surplus to Record Debt and Interest Payments in the BILLIONS.. that''s tax dollars by the way... It''s just mind boggling. You would figure a High School Student could do better than they did.
Posted by txengr at 08:01 PM : Jan 27, 2008
+ report abuse
Did you benefit from the Tax Cuts we borrowed all that money for? If so, yes you should pay. If we do NOT get money into the system and soon we could well slide into a Depression. Maybe someday we''ll figure out that "Trickle Down" doesn''t work because it''s the Working guy who pays the freight. If he doesn''t have the bucks then it doesn''t work... take it from me in recent years NONE of the money has "Trickled Down" to us.
...there''s a reason why the rich get richer....etc.
The trigger of this problem was Alan Greenspan lowering interest rates to levels never seen before because of the dot com bubble and 9/11. Many central banks outside of the US followed suit. This flooded the market/banks with cheap money. One bubble (the dot com bubble) was transformed into a new bubble (the real estate bubble). Speculators started buying houses around the world and driving up prices. Banks were getting rich and had little risk because they bundled these loans up and sold them to greedy investors searching for yields. That''s where the problem with the banks came in. They started giving loans to anyone because the loans didn''t stay on their books. So, they didn''t care. This has been happening in many countries throughout the world.
Thank you, "Valerie0903".
Honest perspective from a former insider is obviously very valuable to this topic.
It is stories and people like this that will allow the US economy to fail! If you signed it, OWN it. Do not come back and say "I did not know". What a crock! Take some ownership and live it. We ALL read the same thing at CLOSING. If you are an IDIOT, do not buy a house and claim someone else at fault.
The report was so one sided I dare the producers to contact me and ask what responsible folks consider. My wife and I bought the house we are in in the time frame spoken about. Go figure, we took a fixed rate and fought the whole way to the table as I wanted the ARM. Look who is right. SHE WAS!
Do not blame Bush or the gov. for this. This is 100% owned by the industry. And private industry.
Jay Michaud
The "professionals" in this could see this coming a mile away - its exactly the same thing Milken did 20 odd years ago - they needed the people at the end of the chain to keep buying as long as possible so they made it easier and easier and also "pushed" the idea that property would never go down - I could have bought in 2002 but never did - I will buy in 2010 for probably less....
people like mozilla at countrywide should be in jail.
What does this have to do with politics? However, since you bring this up, the last time something like this happened was in 1990/91 and people also walked away and mailed the keys to the bank. Who, by chance, was the president at that time? I''ll give you a guess, he had the same last name as the current president.
There is a reason to keep the vast majority of the population barefoot and stupid. Many of the buyers were stupid and some were fraudulent. This does not however let the banks and regulators off the hook. At the end of 2006 I remember hearing about the huge bonuses given out on Wall Street. Many bankers (not even close to CEO level) were getting 10 million and 20 million dollar bonuses for one year. Much of those bonuses were tied up in this mess and they don''t have to give it back.
Jay Michaud
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Posted by Jay_MIchaud at 08:50 PM : Jan 27, 2008
+ report abuse
So Bush ASKING the Fed to LOWER Rates and asking the Fascist in Congress to take off the restrictions to prevent just such events don''t count? I''ve come to the Conclusion that you fascist will come up with and excuse for the Incompetent fuhrer of yours no matter what. YES he is partly to blame and ALL to blame for the failure to balance the budget and for the Debt that''s comsuming all our tax funds...even MORE now to get us out of this mess. Sieg Heil Bush!!
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Posted by whatithink at 08:43 PM : Jan 27, 2008
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It''s always someone else''s fault isn''t it bootlickers??? ROFLMAO For 7 long years now, through failure after failure.. after LIE after LIE, I''ve heard just about every excuse known to man. The ONE thing I have never heard though is an responsibility. The ONLY thing that I can think of as far as success from the fascist congress was interferring in that Florida Family''s decisions on a Brain Dead Woman. Sieg Heil Bush!!
It is stories and people like this that will allow the US economy to fail! If you signed it, OWN it. Do not come back and say "I did not know". What a crock! Take some ownership and live it. We ALL read the same thing at CLOSING. If you are an IDIOT, do not buy a house and claim someone else at fault.
The report was so one sided I dare the producers to contact me and ask what responsible folks consider. My wife and I bought the house we are in in the time frame spoken about. Go figure, we took a fixed rate and fought the whole way to the table as I wanted the ARM. Look who is right. SHE WAS!
Do not blame Bush or the gov. for this. This is 100% owned by the industry. And private industry.
Jay Michaud
http://www.youtube.com/watch?v=iVLB9LfHXjU
Two youtube videos on the global housing bubble.
Banks have a responsibility to make sound decisions. They were led by greed these days. With mortgage vehicles like NINJA loans (No income, No job, Absolutely No problem), they were clearly asking for problems.
You forget, THIS IS PRIVATE INDUSTRY. Let them fail and they will be replaced with companies that know how to run in the market.
Take Bush or the soon to be *** out of the game and let capitalism take over. Do not allow those from public education sway you.
Take ownership and drive the consumers do do the work. If you bought a 200K home and could only dare to afford a 100K home, who''s fault is it? BALANCE YOUR CHECKBOOK and SAVINGS ACCOUNT!!
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plus another good one:
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Jay_Michaud
What is needed is a balance between private and public industries. Private industry is about making a profit. Some things should not be solely about making a profit. Have you learned nothing from Enron?
How do we separate out those who didn''t know what they were doing to those who were taking advantage of the system? We shouldn''t be bailing out the guy who invested in too many properties or the couple who are business savvy enough to know they were playing with fire - but we should help out those like the day care owners who relied on the advice they paid the mortgage broker to give them and got taken.
The banks already got their money up front - they knew they were *** around but those fees kept adding up and they took them - now they should forfeit instead of being bailed out. The people they took advantage of are the ones who should be helped instead.
MCVet,
Banks have a responsibility to make sound decisions. They were led by greed these days. With mortgage vehicles like NINJA loans (No income, No job, Absolutely No problem), they were clearly asking for problems.
There is a system of federal banking regulators put into place for a reason - they were instituted following the Great Depression.
Under the Bush Administration there are been an attitude of ''olly olly oxen free'' for every industry from energy companies to banks to coal mining.
Bush is an utter disgrace - but then again he always was wasn''t it.
You made a bad judgment, the gov. should bail you out????? Or, should the LENDER take the bite?
"With the help of some Government programs it is possible for mortgages to be refinanced away from interest only or other bad loans to a conventional fixed loan".
Have you learned nothing from Enron?
Of course the banks had a responsibility - and we have to make them responsible - that''s what the Federal Banking Regulators are supposed to be there for -- they let the country down - yet another Bush failure.
There appears to be no department left untouched by the Bush failed theory of neoconservatism -- Bush and Cheney kept telling Congress and the country that the private industries could and would be able to self-regulate.
ANother line of hooey from George W.
Stop being SUCH a tool.
The janitory that cleans the office building you work or live in isn''t financially savvy - which is why he''s not working on wall street. DUH
This has nothing to do with the government forcing banks to loan money to anyone. Banks are not the "victim" in this story. Banks have been making loans to people in poor neighborhoods for the last thirty years. I work in the banking industry. These people still had to meet certain lending criteria. You are mixing things up. Banks were not forced to lend money to anyone. They did so willingly because they were making huge profits.
PK
PK
Get OVER Enron, it is the past and does NOT apply.
Just so we are on the same page. I voted for Bush, but would kick him out in a heart beat. What is going on now,falls on the banking system.
I can tell you this as I am a living proof why NOT to get an ARM.
If you signed the deal you own it. If you have the expectation of a government hand out, than why do we NOT embrace the style of a Socialist ( Communist) Republic?
PK
The janitory that cleans the office building you work or live in isn''''t financially savvy
PK
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