Not surprisingly, the housing market free fall and sub prime mortgage mess are beginning to spill over into other areas and are hurting business as reported in this New York Times story (http://www.nytimes.com/2007/12/17/nyregion/17citywide.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1197903981-0a+Ly0iuYSOn3EyPS6RuZw). The Chimperator's "too little too late" remedy package does not contemplate what the ripple effect of this problem will be, not that I am surprised since the Chimperator lives in a bubble of delusion. The story also focuses on Wall Street's role in creating the mess. It will be a grim Christmas season for many while the rich are insulated from the damage. Here are some story highlights:
Marcia is not in the holiday mood this year. She is not putting any Santas, reindeer or lights outside her house. She is probably not going to have many presents inside. There will be no home improvements anywhere. The fact is, she does not know how long she can even call the place hers. These guys made millions in bonuses, so they go off and buy Rolexes or real estate while people are being put out on the street,” said Mr. Mumm, who is the executive director of the Northwest Bronx Community and Clergy Coalition. “Now the homeowners are asking for their money back. This is about reparations.”
A little more than a year since she bought her Bronx home for $535,000 with no cash down, she is facing foreclosure. Even if she could scrape together the $7,500 to catch up on her overdue mortgage payments, other calamities await: an interest rate that will rise in coming months and a huge balloon payment hovering in the distance like a financial Hindenburg. “I’m not doing anything to fix up the house,” said Marcia, a nursing home aide who declined to give her last name during an interview at a community agency that offers counseling on preventing foreclosure. “I just work, eat, sleep and hope they don’t take my home. This is the worst Christmas I ever had.”
The binge of subprime loans that flooded this area a few years ago has now given way to foreclosures and forced sales by homeowners saddled with onerous mortgages they could never repay. The effects of this free-for-all are increasingly felt even among those who did not take on risky loans. Longtime neighborhood residents worry that their property values will be sunk by the double whammy of poorly maintained homes and revolving-door neighbors, while shopkeepers on the nearby commercial strip on Boston Road — especially those who sell hardware or home furnishings — say business has plummeted by 50 percent or more, as strapped homeowners cut costs.
Other housing advocates asking the same questions have begun to look toward Wall Street for part of the answer. They note how investment banks made tidy profits and bonuses in recent years by scooping up batches of subprime loans to back lucrative securities. “They were telling lenders what kinds of loans to make,” said Kevin Connor, the author of a recent report on Wall Street’s role in the subprime crisis, sponsored by a coalition of housing advocacy groups. “They built this house of cards on the backs of homeowners.”
Despite the losses taken by investments banks in recent months, housing advocates say that banking executives will still get their bonuses this year, and even chief executives who lost their jobs because of the mortgage losses walked away with multimillion-dollar severance packages. “These guys made millions in bonuses, so they go off and buy Rolexes or real estate while people are being put out on the street,” said Mr. Mumm, who is the executive director of the Northwest Bronx Community and Clergy Coalition.
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