Housing History Repeating Itself?

[Desperado]

Right back where we started from.
You are supposed to learn from your mistakes.

 

[Ravi]

It wasn't risky lending, it was the credit default swaps that caused the crash.

 

[DiamondDave]

But but but.. Obama is good

But but but.. It is BOOOOOOSSSSHHHHH's fault

But but but... connnnnnnnnsssssss are bad

 

[DiamondDave]

It wasn't risky lending, it was the credit default swaps that caused the crash.

bullprunes

 

[waltky]

Could Trump’s Tax Plan Upend the Housing Market?...

How Trump’s Tax Plan Could Upend the Housing Market
Oct 02, 2017 - Home ownership has long been a key component of the American dream, helped along by the fact that it offers some hefty income tax benefits. But the Trump administration and Republicans’ new tax plan will likely result in lower home ownership levels, with more people opting to rent rather than purchase a home.

The tax plan includes significant individual income tax system reforms, including the doubling of the standard tax deduction and the elimination of most itemized deductions, except those for mortgage interest and charitable contributions. Given the increased standard deduction ($12,000 for single and $24,000 for married taxpayers), many more taxpayers will forgo itemizing and take the standard deduction. Based on an analysis of an earlier House Republican tax reform plan, the Tax Policy Center estimated that 84% of current itemizers would take the standard deduction if it were doubled. Even more taxpayers will take the standard deduction under the recent Trump proposal due to the elimination of state and local tax itemized deduction.

Even though mortgage interest deduction remains, it will no longer have value for current itemizers who would take the standard deduction under the Trump plan. Only the few taxpayers who would still itemize will receive any income tax savings from mortgage interest, however, those tax savings will likely be substantially smaller than under existing tax rules. The elimination of mortgage-related tax savings for most homeowners, and reduction for others, compounded with the loss of tax savings from deducting property taxes means the after-tax cost of home ownership will increase. A taxpayer in the 25% tax bracket with $11,000 in mortgage interest and $5,000 in real estate taxes would receive tax savings from these itemized deductions of $4,000, or $333 per month, under the current law. The elimination of the home-ownership tax subsidies means that the after-tax cost of home ownership will increase.

The tax reform proposal’s reduction to homeowner tax subsidies could lead to more people deciding to rent homes because it may be a lower-cost alternative to purchasing. Although the proposal lacks specifics, it does not appear to reduce the tax subsidies afforded to owners of residential rental real estate. Rental property owners may continue to deduct interest paid to finance the purchase of rental properties and can deduct state and local property taxes. These items are not considered itemized deductions; instead, they are deductions in computing net rental income. The disallowance of the state and local tax deduction under the Trump plan only applies to an individual taxpayer’s itemized deductions. Given rental property owners will still receive the federal tax savings from both property mortgage interest and real estate taxes, the Republican proposal creates a stark difference in the tax subsidies between owner-occupied homes and rental properties.

Additionally, unlike homeowners, rental property owners receive tax savings through the deductibility of maintenance costs and depreciation. The rental property owner may also avoid tax upon the sale of the property if it is exchanged for another property. The Trump proposals may also further benefit rental property owners through the reduced tax rate of 25% on partnerships and other pass-through entities commonly used in the real estate industry. Although the owners are the ones who actually receive the tax savings from the various allowed deductions, the tenants likely benefit, albeit indirectly, through lower rental rates. In a competitive market, the rent charged to the tenant should be lower due to the tax benefits afforded the rental property owners.

MORE

 

[Toddsterpatriot]

It wasn't risky lending, it was the credit default swaps that caused the crash.

How does a credit default swap do that?
Walk thru the steps for me.

 

[Kosh]

Well banks will still make risky loans as long as they know the government will bail them out.

The far left bailed out the banks and wall street and not the people that were affected.

 

[Toddsterpatriot]

Well banks will still make risky loans as long as they know the government will bail them out.

The far left bailed out the banks and wall street and not the people that were affected.

The government didn't bailout banks for their risky loans.
The banks lost trillions.

 

[TheDude]

Any housing crash will be the DIRECT result of ongoing ridiculously low interest rates, plain and simple. In fact, they didn't even raise the rates until Obama was out of office. Those 500K homes at 3% are really 230K homes at a historically normal 7.5% rate. The low interest rates were a band aid on the housing industry, and inflated the true values of homes. In other terms, the Obama admin. fucked up. The rates should have seen a gradual increase.

 

[NightFox]

It wasn't risky lending, it was the credit default swaps that caused the crash.

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

 

[Toddsterpatriot]

It wasn't risky lending, it was the credit default swaps that caused the crash.

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

Pretty sure they didn't work that way in 2007-2008.
All swaps were between the 2 parties. A couldn't sell the contract he signed with B to C, A would have to write a new contract with C.....no netting.

 

[MACAULAY]

It wasn't risky lending, it was the credit default swaps that caused the crash.

How does a credit default swap do that?
Walk thru the steps for me.

_________________________________

I'll try.

Because they were based on loans to people who were allowed to get loans using their Welfare Payments as income, or unverified income, meaning LIES.

Clinton started this by letting Fannie Mae and Freddie Mac set the rules for who qualifies, because he wanted deadbeat Democrats to be able to live in nice house just like people who actually worked for a living.

Bush tried to stop it, because it was obvious what the end result would be, but the Cocksucking Liberals called him a Racist....lead by that official Cocksucker Barney Frank....who assured everyone that Fanny Mae and Freddie Mack were just fine and solvent as Hell, even though they had loads of loans on the books that were from many Democrats who would never be able to pay them back.

So, Wall Street got involved---that's mostly the very Greedy, and mostly Democrats....and jumped on the wagon with Fannie Mae and Ferddie Mac-----and then the defaulting on the bad loans commenced in earnest.....and Fanny Mae & Freddie Mac crashed out as they obviously had to...and that nearly took the Shyster Democrats on Wall Street down with them.

Because the Democrat control about 90% of the Media, the Republicans got the blame....because 1) Bush was still in office, and 2) Democrats are too poorly educated to understand it all anyway.....when in fact, lots of Democrats should have gone to jail. The Republicans do share some of the blame for being so scared shitless of the Democratic/NewYork Media, that they didn't do enough to stop the Scam, for fear of being called Racists.

So, yea, if you are a dumb-ass Democrat, you think Credit Default Swaps did it. And you were probably educated in a rotting northern city run by Democrats for more than 40 years.

 

[NightFox]

It wasn't risky lending, it was the credit default swaps that caused the crash.

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

Pretty sure they didn't work that way in 2007-2008.
All swaps were between the 2 parties. A couldn't sell the contract he signed with B to C, A would have to write a new contract with C.....no netting.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable", in fact it was common for speculators to buy both the underlying debt and the CDS contract for the debt if they reasoned that the debt was likely to default (so they could get the risk premiums on discounted debt) as well as the inverse case where speculators buying high premium CDS contracts and the underlying risky debt that they reasoned wouldn't default (same reason as the inverse case). Along with the above you also had a proliferation of naked CDS positions which is essentially just another synthetic derivative bet by speculators on assets they didn't own thus magnifying the negative effects of credit disruptions if the bets went bad.

The bigger problem however wasn't the buying and selling of contracts (since that is a two party risk transfer), it was the situation you described where the original underwriter insures the CDS risk (with a new contract) to a third party and then that third party does the same thing with a fourth party and so on, this creates an opaque risk chain; its difficult to calculate actual risk because it's hard to determine who all the parties in the chain are let alone which ones are the "weak link(s)"; there is a cascading effect if any of the parties involved are unable to pay off in the event that the original debt defaults.

 

[Toddsterpatriot]

It wasn't risky lending, it was the credit default swaps that caused the crash.

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

Pretty sure they didn't work that way in 2007-2008.
All swaps were between the 2 parties. A couldn't sell the contract he signed with B to C, A would have to write a new contract with C.....no netting.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable", in fact it was common for speculators to buy both the underlying debt and the CDS contract for the debt if they reasoned that the debt was likely to default (so they could get the risk premiums on discounted debt) as well as the inverse case where speculators buying high premium CDS contracts and the underlying risky debt that they reasoned wouldn't default (same reason as the inverse case). Along with the above you also had a proliferation of naked CDS positions which is essentially just another synthetic derivative bet by speculators on assets they didn't own thus magnifying the negative effects of credit disruptions if the bets went bad.

The bigger problem however wasn't the buying and selling of contracts (since that is a two party risk transfer), it was the situation you described where the original underwriter insures the CDS risk (with a new contract) to a third party and then that third party does the same thing with a fourth party and so on, this creates an opaque risk chain; its difficult to calculate actual risk because it's hard to determine who all the parties in the chain are let alone which ones are the "weak link(s)"; there is a cascading effect if any of the parties involved are unable to pay off in the event that the original debt defaults.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable",

No. They're contracts between 2 parties. Not standardized, not nettable and not tradeable.

 

[NightFox]

It wasn't risky lending, it was the credit default swaps that caused the crash.

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

Pretty sure they didn't work that way in 2007-2008.
All swaps were between the 2 parties. A couldn't sell the contract he signed with B to C, A would have to write a new contract with C.....no netting.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable", in fact it was common for speculators to buy both the underlying debt and the CDS contract for the debt if they reasoned that the debt was likely to default (so they could get the risk premiums on discounted debt) as well as the inverse case where speculators buying high premium CDS contracts and the underlying risky debt that they reasoned wouldn't default (same reason as the inverse case). Along with the above you also had a proliferation of naked CDS positions which is essentially just another synthetic derivative bet by speculators on assets they didn't own thus magnifying the negative effects of credit disruptions if the bets went bad.

The bigger problem however wasn't the buying and selling of contracts (since that is a two party risk transfer), it was the situation you described where the original underwriter insures the CDS risk (with a new contract) to a third party and then that third party does the same thing with a fourth party and so on, this creates an opaque risk chain; its difficult to calculate actual risk because it's hard to determine who all the parties in the chain are let alone which ones are the "weak link(s)"; there is a cascading effect if any of the parties involved are unable to pay off in the event that the original debt defaults.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable",

No. They're contracts between 2 parties. Not standardized, not nettable and not tradeable.

You need to do more homework because you're wrong, CDS are credit derivatives and were and are still bought and sold (traded), just like a myriad of other types of derivative contracts.

 

[Toddsterpatriot]

It wasn't risky lending, it was the credit default swaps that caused the crash.

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

Pretty sure they didn't work that way in 2007-2008.
All swaps were between the 2 parties. A couldn't sell the contract he signed with B to C, A would have to write a new contract with C.....no netting.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable", in fact it was common for speculators to buy both the underlying debt and the CDS contract for the debt if they reasoned that the debt was likely to default (so they could get the risk premiums on discounted debt) as well as the inverse case where speculators buying high premium CDS contracts and the underlying risky debt that they reasoned wouldn't default (same reason as the inverse case). Along with the above you also had a proliferation of naked CDS positions which is essentially just another synthetic derivative bet by speculators on assets they didn't own thus magnifying the negative effects of credit disruptions if the bets went bad.

The bigger problem however wasn't the buying and selling of contracts (since that is a two party risk transfer), it was the situation you described where the original underwriter insures the CDS risk (with a new contract) to a third party and then that third party does the same thing with a fourth party and so on, this creates an opaque risk chain; its difficult to calculate actual risk because it's hard to determine who all the parties in the chain are let alone which ones are the "weak link(s)"; there is a cascading effect if any of the parties involved are unable to pay off in the event that the original debt defaults.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable",

No. They're contracts between 2 parties. Not standardized, not nettable and not tradeable.

You need to do more homework because you're wrong, CDS are credit derivatives and were and are still bought and sold (traded), just like a myriad of other types of derivative contracts.

You need to do more homework because you're wrong, CDS are credit derivatives and were and are still bought and sold (traded),

If Goldman wrote a CDS contract with Merrill, Merrill could not liquidate the position by selling it to Morgan.
If Merrill wrote an offsetting contract with Morgan, Merrill would have 2 contracts on the books, not zero contracts.

just like a myriad of other types of derivative contracts

Don't confuse these contracts with exchange traded options and futures.

 

[martybegan]

It wasn't risky lending, it was the credit default swaps that caused the crash.

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

Just like any failure, be it mechanical or programmatic, there is almost never just a single event that leads to the result of the failure, it is normally a chain of events that cause the inevitable result.

 

[NightFox]

Caused no, exacerbated yes.

Here's a hint: they're used to insure against loan default and they only pay off if the insured debt defaults or significant credit event on the part of the debtor occurs, thus if Banker Joe only makes loans that are at a low risk of default then he doesn't need to pay CDS premiums to insure them against default, on the other hand if Banker Joe makes risky, too stupid to succeed loans he probably wants to buy insurance against default (so he can move the risk off his books and free up reserves to make more stupid ass risky loans) and that's where CDS comes into play and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

So, CDS weren't the root cause of "the crash" (it was risky lending and even riskier derivatives bets) but opaque CDS chains and piss poor risk management up and down the food chain did exacerbate it... just ask the stupid CDS loving dickweeds at AIG.

and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

Pretty sure they didn't work that way in 2007-2008.
All swaps were between the 2 parties. A couldn't sell the contract he signed with B to C, A would have to write a new contract with C.....no netting.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable", in fact it was common for speculators to buy both the underlying debt and the CDS contract for the debt if they reasoned that the debt was likely to default (so they could get the risk premiums on discounted debt) as well as the inverse case where speculators buying high premium CDS contracts and the underlying risky debt that they reasoned wouldn't default (same reason as the inverse case). Along with the above you also had a proliferation of naked CDS positions which is essentially just another synthetic derivative bet by speculators on assets they didn't own thus magnifying the negative effects of credit disruptions if the bets went bad.

The bigger problem however wasn't the buying and selling of contracts (since that is a two party risk transfer), it was the situation you described where the original underwriter insures the CDS risk (with a new contract) to a third party and then that third party does the same thing with a fourth party and so on, this creates an opaque risk chain; its difficult to calculate actual risk because it's hard to determine who all the parties in the chain are let alone which ones are the "weak link(s)"; there is a cascading effect if any of the parties involved are unable to pay off in the event that the original debt defaults.

Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable",

No. They're contracts between 2 parties. Not standardized, not nettable and not tradeable.

You need to do more homework because you're wrong, CDS are credit derivatives and were and are still bought and sold (traded), just like a myriad of other types of derivative contracts.

You need to do more homework because you're wrong, CDS are credit derivatives and were and are still bought and sold (traded),

If Goldman wrote a CDS contract with Merrill, Merrill could not liquidate the position by selling it to Morgan.

Why not? it's a contract, just like a mortgage is a contract, the obligations and benefits on either go to the holder of the contract.

If Merrill wrote an offsetting contract with Morgan, Merrill would have 2 contracts on the books, not zero contracts.

Yeah and? what makes you think that risk is calculated by counting the number of contracts one has on one's books?

just like a myriad of other types of derivative contracts

Don't confuse these contracts with exchange traded options and futures.

I'm not but it appears that you are since you're the one that's claiming that CDS aren't tradeable, which leads one to conclude that you think that trades only occur on public exchanges.

 

[easyt65]

Right back where we started from.
You are supposed to learn from your mistakes.

'Those who fail to learn from history / their mistakes are doomed to repeat them."

 

[Mr.Blonde]

Based on the article that was posted on this topic if it does "crash" the housing market again then the market needs to crash.

If the only way a home owner can be one is through a tax credit then that person doesn't need to be one. My Grandmother worked for a bank all her working life and when the "bank crash of 08" happened she couldn't understand why (she had been retired for a few years and had been out of the loan department for even longer).

She asked why. She had told me when she was in the loan department if someone wanted to buy a house the bank would put the person through hell to make sure they could afford a house.

With the college debt bubble something will have to be done because that debt will bring down the housing market before a tax credit.