Nice to have Abbas G. this week say things should be swell in a month or two and the national media finally catch onto how screwed all of the central valley is, not just Stockton. As you pointed out in your article (thanks for the link, missed it the first time around and can never find older articles on the website), the housing collapse is going to hurt anyone wanting to start their own busienss. Its hard enough to get secured credit like HELCs, but the guy saying people should get unsecured ones is crazy or stupid. With major banks like BS going under because of a credit crunch you can forget about getting money to start your scrapbooking store--especially if you home value is tanking.

 Housing prices should be allowed to fall: Paulson

WASHINGTON (Reuters) - Housing prices need to fall further to permit shell-shocked housing markets to stabilize and policy-makers should not interfere with that process, Treasury Secretary Henry Paulson said on Wednesday.

Speaking to the U.S. Chamber of Commerce, Paulson said regulators including the Federal Reserve were "vigilant" and doing everything they could to minimize damage to the economy but played down the value of a more direct government role.

"A correction was inevitable and the sooner we work through it, with a minimum of disorder, the sooner we will see home values stabilize, more buyers return to the housing market, and housing will again contribute to economic growth," he said.

Paulson said only about 2 percent of U.S. home mortgages were in foreclosure but said that as many as 2 million foreclosure starts might occur this year. In addition, he said that 8.8 million households may now have negative home equity -- meaning their mortgages are higher than the house could be sold for -- and said that will rise.

http://www.reuters.com/arti...

 Equity Loans as Next Round in Credit Crisis

Little by little, millions of Americans surrendered equity in their homes in recent years. Lulled by good times, they borrowed — sometimes heavily — against the roofs over their heads.

Now the bill is coming due. As the housing market spirals downward, home equity loans, which turn home sweet home into cash sweet cash, are becoming the next flash point in the mortgage crisis.

Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.

To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures.

http://www.nytimes.com/2008...

 Be It Ever So Illogical: Homeowners Who Won’t Cut the Price

In the wake of the biggest housing boom on record, it’s understandably hard to accept a new reality. Robert Glinert, a real estate agent in the Los Angeles area, said he has recently been saying no to almost half the sellers who have asked him to represent them. Their initial asking price is just too unrealistic.

“People say, ‘I don’t care about the market — my home is still worth what I paid for it in 2006,’ ” Mr. Glinert told me. “And I say, ‘To you. Only to you.’ ”

Doing what Mr. Glinert is asking sellers to do — dropping the asking price below their purchase price — is especially difficult. It’s tantamount to admitting defeat.

David Laibson, a leading behavioral economist, categorizes this sort of behavior under the heading of “the principle of the matter.” His point is that people often go to great lengths to avoid taking a loss — or simply having to acknowledge one. “Even a small loss evokes a sense of frustration,” said Mr. Laibson, a professor at Harvard. “There’s something magical about ‘at least breaking even.’ ”

Bakotime: "...major banks like BS going under because of a credit crunch..."

Bear Sterns is not a bank. It is a stock brokerage firm doubling as an "investment bank"  that was allowed to operate LIKE a bank in some ways but without the same regulatory oversight.

We're not hearing about real banks going under with massive sub prime debt because banks aren't allowed to do that sort of business.

Fortunately, banks aren't allowed to play too fast and loose gambling and speculating with depositors' money or the financial debacle might be much worse.

When you invest or deposit your money in a government insured bank account, the bank can't "invest" your dollars in junk paper. 

This financial crisis underscores the perils of  the government sanctioned marriage of stock brokerage and investment "banking" which condones the loose use of investor's funds.

Real banks like Chase Bank have also found ways to tangentially unite their speculative arms to their insured banking operations in a complicated collection of divisional enterprises including brokerages, etc., under the umbrella of a major holding company type entity.

JP Morgan/Chase's "bailout" purchase of Bear Sterns loan inventory, however was completed at a fraction of the overall dollar value of the secured properties. It's unclear how many homes Chase now "owns" or is about to own through defaults.

But you can bet it is the biggest single land grab in history.

And you can also bet that it will prove to be highly profitable.

 I didn't mean that BS was an FDIC bank--of course its a non-depository institution, but its one of the largest and oldest of its type. This credit crunch took down a firm that survived the great depression and was one of the 5 largest in the world (and why the Fed won't let it go bankrupt).

The fed regulation (such as FDIC, margins, and the like) keep 'normal' banks from collapsing due to liquidity problems from credit shortages. But these shortages are real.

I didn't mean to mislead and infer that '29 and run on banks are around the corner. They are not. But or IRA profolio is another matter.

Not sure how many homes Chase will have for long--notes on homes sure, but financial institutions make bad landlords/sellers. And they know it. Expect to see Chase cast off as much of the property as possible and look for revenue from the millions of transactions the BS runs for third parties. That's the reason the Fed didn't want it to collapse.

As for how profitable the move will be--the fact the Fed had to garuntee it says either collusion or there is a ton of risk invovled. Probably risk since GS or other firms would have been fighting for a piece of BS. Of course high risk means big profits or losses. Of course, Chase is insured against the losses but the Fed.