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abitare (99.38)

Timmy Geithner is a Debt Serf & Gary Coleman Pushing 99.25% APR Loans

Recs

15

April 25, 2009 – Comments (11) | RELATED TICKERS: WFC , BAC

The velocity of this implosion is amazing. Having inept and corrupt leadership is just adding gas on this fire.

itulips has the story.

Timmy Geithner the debt serf: Out of the pan and into the FIRE Economy

Who better to run the US Treasury Department than a poster child for debt serfdom?

Little is known about Geithner's finances, other than tax problems

The couple bought a home in the Washington suburb of Bethesda, Md., in 1992 for $275,000, taking a mortgage of $202,300. Through a series of refinancings and the sale of two properties, they climbed the economic ladder until they bought a house for $1.6 million in Larchmont, N.Y., in 2004.

All of the Geithners' mortgages - from big banks including Nationsbanc, which is now Bank of America; Chase Manhattan, which is now J.P. Morgan Chase; and Wells Fargo - carried adjustable-rate mortgages with the risk that annual rate increases could raise their interest payments to as much as 11.25 percent, though the couple tended to refinance or sell their homes before they faced a rate adjustment.

They also took out second mortgages, now known as home equity lines of credit, borrowing a total of nearly $1 million in 2002 on their second Bethesda home, which they bought a year earlier for $1,085,000.

In 2004, they sold that house for $1.45 million and bought their current house in the New York suburb of Larchmont with a $1 million Wells Fargo mortgage, later adding a $400,000 home equity line of credit, also from Wells Fargo.

(Hat tip to member BK)

Don’t know about you, but I want my Treasury Secretary to either own his house outright or if he is going to hold a mortgage at least show that he knows a lot more about household finance than Gary Coleman, by putting 20% down and taking out a 30 year fixed rate mortgage, to demonstrate that he is not financially illiterate. Taking out an ARM when mortgage rates are near historic lows and home prices are falling indicates he thinks either mortgage rates will remain low or decline from near 40 year lows over the course of the next 30 years, or housing prices will rise before his ARM adjusts so that he can refinance into a lower fixed or adjustable mortgage, or both. Anyone with half a clue about what is happening in the housing market knows that the likelihood of either happening is close to zero. Why can't he?
 

The rest of the story is here.

http://www.itulip.com/forums/showthread.php?p=76323#post76323

Another great video from itulip.

11 Comments – Post Your Own

#1) On April 25, 2009 at 1:59 PM, usmilitiadude (33.32) wrote:

I thought personal and public life were seperate. It doesn't matter if you are the President receiving oral favors from an intern while on the phone being briefed about a military operation. Or, if a Senator or Representative is arrested for crashing their car while stoned or drunk, it really doesn't matter as long as that person agrees with me politically. Just because someone is in deep debt, doesn't mean they are susceptible to bribery.

Blind leading blind.

How about Madam Secretary of State. She still owes millions for her failed campaign. Maybe a Saudi Prince will help her out.

 

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#2) On April 25, 2009 at 8:34 PM, Alex1963 (29.33) wrote:

Abitaire,

Sorry but I agree with usmilitiadude 

Why people make personal financial decisions is just that-personal.

House prices were falling? in 2004? Where? 

Surely you do know that an unused equity line can often have no payments. I have one right now. If I don't use it's just another contingency fund. Costs me not dime one. Did Geithner use any of it? Does it even matter? In 2004 home prices nationally were doing great. That was a common scenario for savvy homeowners. Just because many others who shouldn't have taken out equity lines did doesn't mean that all people who did were stupid or dishonest. What gives with this whole post?

Honestly!

Don't Geithner bashers and muckrakers have enough legit stuff to complain about with him? If this is the most dirt they could dig up on they guy going back to '92 for pete's sake then I like him even more. 

Furthermore, as a realtor I have seen many succussful and savvy (and honest LOL) clients opt for ARMs over fixed rates and with less down over more they could easily afford. One reason is that they may feel they can invest the difference in downstroke in a more liquid vehicle. Or flat out make a decent return which would offset the risks of most scenarios. I always advised my clients to a least look at ARMs, even when the rates were close to those of fixeds, because ARMs by their nature are better for the banks. They offer all kinds of attractive perks to you for sharing with them the risk of potentially rising % rates. It would be interesting to get the full details of that loan. I think it highly likely it was tied to an index like LIBOR or the 11th District Cost Of Funds-(the latter being the more stable of those 2 most pouplar ARM indexes)and that it was designed to adjust down as well as up. It also could have had a payment Cap. meaning no matter what rates did it could not adjust up or down more than (typically) 5%-7% over the last periods total payment. i.e, $5,000 payment 1st period adjustment max $5,250. If it was a 3 year ARM he'd have a firm lower payment for that whole period. With a 5 year Arm fixed for 5 years. These are great mortgages. Perhaps you are not familiar with the many options, protections ands back stops these loans can offer? Well many people aren't. Far too many in my professional opinion. But I wouldn't say you lacked "half a clue". Maybe a little quick and harsh to judge with woefully little info tho in this case.

Personally I have had far more ARMs than fixeds going back to the 80s when ARMS were still more uncommon. Some of the earlier ones I had even offered "conversion" options. One condo I had I converted to a fixed rate for the total cost of $150 per the terms of the ARM. I saved thousands in interest over the several years while my equity grew to the contractual 20%.

Prediction: You watch,  lenders will re-open the playbooks now that rates are so low and offer even more creative and attractive ARMs than in they have in decades. To dismiss an ARM out of hand with no research to me is a huge mistake. There is no harm in investigating. You might be amazed at the ARMs available which suit your individual finances, risk tolerance and investment sophistication perfectly.  

Lastly, I hope you actually do follow thru on your sentiment and research the housing purchase histories of those you support, not just those you deride. Maybe Itulip is investigating some Republicans right now! You want a real scandal how about that putz Sen Gregg (R N.H.). Anyone follow his little military base investment scandal? And he still claims he did nothing wrong because it violates no Senate ethics laws Oh really? You steer millions of pork straight to a real estate investment of your own and you need rules to tell you that's unethical? No wonder he turned down the Obama appointment.  Anyway, you might find equally "objectionable" info if not far worse. Ron Paul could have a pyamid scheme going! LOL Just kidding. He seems like a total straight arrow to me-my gut feeling, with his personal "House" in order (pun intended) Tho Geithner seems pretty sincere to me also. Sorry but I'm still "Reserve-ing" (HAHA-stop meeee!) judgment. 

This post is not up to your usually higher standards IMO

Sorry No rec

Sincerely, 

Alex 

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#3) On April 25, 2009 at 10:05 PM, tonylogan1 (28.65) wrote:

Alex, I am pretty sure militiadude was being facetious. Character does count.

 

I would contend that someone’s handling of personal financial transactions also directly relates to their ability to perform a financial job. Would you hire a drunk to run an AA class? A clown to run a bank? Ok, bad example.

 

Your understanding of real estate baffled me, and then I got to the point in your comment where you indicate you are a realtor. Now I got it.

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#4) On April 26, 2009 at 5:12 AM, SuperPicks (29.72) wrote:

Your understanding of real estate baffled me, and then I got to the point in your comment where you indicate you are a realtor. Now I got it.

LOL

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#5) On April 26, 2009 at 10:28 AM, Alex1963 (29.33) wrote:

 tonylogan1

I think you're right. Missed the (now) obvious sarcasm. Too much or not enough coffee. Yes, I agree character counts.

I would still contend there is nothing in that article which even mildly suggest Geithner was being stupid or making an obvious bad move. What am I missing? I certainly understand why many are critical of him in his past and current professional life, tho even if I don't necessarily agree.

Were you being sarcatic with me about my RE creds? "LOL" Because I'll go toe to toe on RE knowledge, experience, and ability to accurately & profitably predict trends with anyone here. Please, elaborate on your comment & amusement.

 SuperPicks  Same question. 

If I'm being defensive for no reason, my apologies.  

Sincerely, & not yet laughing along. 

Alex 

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#6) On April 26, 2009 at 10:51 AM, jszoke01 (25.86) wrote:

Rec - This is a very legit point.  If our Treasury Secretary chooses a variable rate mortgage, it says 1) he is willing to gamble with his finances and 2) he had no knowledge that there was something fundamentally wrong with the economy.  This mentality and lack of foresight, combined with the highest position in government dealing strictly with the finances of our nation, is not in our nations best interest.

Because I'll go toe to toe on RE knowledge, experience, and ability to accurately & profitably predict trends with anyone here

Alex - how many people that you sold houses to in 2004 - and recommended ARMs to - are seriously regretting that decision now?

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#7) On April 26, 2009 at 11:19 AM, abitare (99.38) wrote:

Everyone,

Thank you for the replies. I just typed a long reply back, but lost it in a CAPSs. argggg

Good replies here.

Alex1963,

I would guess you are the 20% making 80% of the money in real estate. Anyone that can talk/type that much with confidence and with out factual support can sell, sell, sell and close.

No doubt. You made some major money in the last few years. Feel free to tell us.

I would take some of the money and fortify your residence or move to a safe area and get a PO Box away from your residence.

In case you sold a house to a guy like this:

For the rest of us, here is some reality:

Here is another example of the Treasury Secretary scenerio:

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#8) On April 26, 2009 at 1:29 PM, tonylogan1 (28.65) wrote:

Alex –

 

I honestly did not mean my comment as a jab at you personally or against all realtors. In fact after I wrote that, I reviewed the history of your replies on CAPs and found you seem to be one of the very few in the real estate industry that seem to have what resembles integrity. Add to that, your calm, rational response to my message, and I suspect you are a pretty stand up guy.

 

That being said, what I meant is that your profession, being in real estate, is jading your ability to see what constitutes good financial behavior.

 

Of course you are seeing nothing wrong with someone progressively selling their house and moving up to bigger and bigger houses using bigger and bigger mortgages. That is because that behavior is what drives your industry, and ultimately that is one (of many) of the failings of the economy.

 

As far as who I would like running the economy, I prefer a guy with a real estate mindset like Warren Buffett, who despite being worth billions, still lives in a modest home and spends his money on building productive businesses, and when he passes away will be giving substantial amounts of money to helping fix problems for less fortunate people around the world (through the Gates foundation).

 

There are plenty of people like this, and that is one reason why I prefer Volker for the job. I like a guy that is willing to say we need to take some short term pain, in exchange for long term prosperity. So yeah Tim, I’d suggest you stay in your smaller house for a little while and pay off the loan.

 

Bottom line is that even a simple guy like me could see back in 2004-05 that housing was in a bubble, and was not the place to invest, especially using riskier loan structures. So to me it begs the question, did Geithner not understand slightly higher than basic finance, or was he counting on his special relationships with top banks to pay off. (He never expects Wells Fargo to jack up the rate on his loan, since he knows it is in their best interest not to).

 

Geithner exposes his character through these actions, and I don’t think it is ridiculous for us to judge him on it.

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#9) On April 26, 2009 at 8:07 PM, Alex1963 (29.33) wrote:

Abitare,

We have tangled in the past but I sincerely would like to bury any hatchets. I came here in good faith and with no agenda. So if any past remarks of mine were unduly harsh or caused offense or might be behind remarks like "Heres' some relity for the rest of us" Can we not do this again? We  can duke it out some more if you want but what's the point?

I guess I can't do much with the criticisms above if no one is actually reading my comments but I've been guilty of that myself. 

1st Abitare this link doesn't work at least for me.

Little is known about Geithner's finances, other than......

But Here's the Larchmont NY RE figures from Trulia for the last 9 years

http://americantowns.trulia.com/real_estate/Larchmont-New_York/market-trends/

I'd say they did exceptionally well in their choice of communities. Westchester county is one of the most exclusive and sought after areas in the country. Regardless, see the Median Home Prices 2000-2009 chart. Look at both the prices in 2004 and where those prices are today. I see a roughly 25% decline from the peak of 2004. I see prices have actually fluctuated up and down but stayed failry near the tops and bottoms over the last 9 years excepting a spike down and equal spike back up in early 2006., If they do sell or refi anytime soon and time it right they could do Ok. Especially compared to the overall US market. I can only hope your area ise doing as well, Abitare (& TonyLogan).

But in all honesty if the Geithners were asking me what I thought they should do I'd tell them to see if they could catch the next upswing or if not to be prepared for a potential long wait at least if they are adamant about capturing any lost equity back IF they even lost any. But again these are medians and not Geithner's home. He bought over the median (1.6M where the top median in 2004 appears to be between 800K & 1.35M) Sometimes those "upper end" homes are somewhat disconnected. If their home is larger, better located or just over all more appealing buyers in those ranges can out-perform the median pricing. They can also perform worse. I don't know enough. Neither do you tho. Unless there was more specifics in that article.

I would further point out that many people do not consider their home to be strictly and solely an "investment". Sure it's a huge potential perk and a potential wealth builder but to make decisions on a house because it's going to surely increase is ludicrous in any market or any year. Very few homeowners (not speculators) decide to buy a home for that sole reason. It's not even very far up the list. When financial motivations do arise with my clients it's often with 1st time buyers who are getting hammered at tax time with no write-offs. In point of fact with married couples women have the lionesses share of the final home buying decisions. Often they might even drive the initial purchase or re-purchase decision. Want to get out of the city for the kids or to start a family, want more or less room, a yard etc.Be closer to her job or mid way who the heck knows! But the couple also may want the write-off. Or be protecting capital gain from a previous sale. They might enjoy renovating and can add value. They might have found a real bargain, suspected or impending market fall or no. They could even decide that though a fall is likely that it still makes sense for THEM to purchase. They may intend to stay for years past when they feel a downturn would materially financially affect them or feel they can rent it out if they do have to move earlier than planned. You (and your wife) may, believe it not, NOT consider your personal home decisions to be primarily about your job resume! Can you even imagine the gall! You, Abitare, (or TonyLogan) might be leery of the uncertainty of being at a landlord's whim of renewing your lease ie you may have kids and want them in that particular school. What if your landlord hikes the rent, decides to move in or sells, or puts their unemployed (former Treasury Secretary) brother-in-law in after refusing to renew the lease.? For those reasons and many more it's not strictly comparable to other "investment" decisions like stock investing. Because you don't live in your stock portfolio. Or (I hope) count on the assured increase of either one. 

But to beat a dead horse, let's say Geithner did suspect the market was going to head down. Per the article "though the couple tended to refinance or sell their homes before they faced a rate adjustment." Those illiterate fools! And so far I'll point out, they actually sold for a profit. But let's say that the last house bought in 2004 is upside down. As an example, do you Abitare, feel you are "financially illiterate" if you buy a stock in a troubled sector knowing that sector might go down? Are there then no choices which might still have been attractive? Might you make a perfectly legitimate decision to buy anyway and then a further perfectly rational decision to ride out a drop because you feel it will recover? Or  factor in any dividends (ie Tax write offs, in the case of a house.) Is that one stock (house) the sum total of your income and net worth?

Well, I'm impressed with I CAN see here. That a future treasury secretary did have the acumen to navigate interest rates this well (selling or refi before adjustment) and located himself in one of the most historically strong markets in the US which it seems has done far better holding it's median pricing than than most of the nation. And further, per the article has done pretty well for himself "movin on up" since '92 as the article reports. 

I'm sorry but I have seen no real defensible criticism here from any of you. Either about me, my comments or this story. 

What I seem to be seeing here is what I'd call the accountant test tho. Every decision is 1st & foremost about money right? No other factor comes close? In which case I assume none of you have kids, drive a nicer or new car, take vacations strictly for fun (with no business write-off) or give your personal time to charities or community service. Or have hobbies. Because there is no defensible financial pay off for any of them either. Oooh I bet Geithner does tho. Hey that's finance related. Where's the nest itulip expose? I can't wait.  I am I making any sense here?

Further, would you be comfortable with every decision in your personal life which could relate to your professional one getting investigated and reported on? I think I'd fail that one. I think 99% of people would. And it would be unfair to judge someone for that. Character IS important maybe the most of all for public service. This article to me is absolutely without merit as a detrmination of Geithners character of financial acumen. Maybe the linked article would set me straight but not what's here or in what I added by way of quick research.

So just how financially conservative are you guys? He should take the same mortgages you would? Buy a ratty used Buick Century because you do? Never buy a new car cfor the huge loss of value a new car suffers the 1st year of ownership? Or because he should have seen how much better a deal he could have gotten by waiting for the auto industry collapse? Would you decide what with todays job market to tell your kids to forget about college since degrees don't have nearly the same relation to salary or even assurance of job entry into a their respective fields. Therefore bad "investment" for you or them. Should everyone rent because you would and WHEN you would? Man, it must be great to know so much about other peoples finances and the all their possible rationales, AND the likely direction of the economy and it's different sectors so that you can judge what's best or "illiterate" for others. Who may have completely different motivations than yours. And from that woefully skimpy-on-crtitical-specifics article. Further can you then relate a home decision to someone's prossional credentials or judgment.

Anyway, Maybe you guys honestly feel this article makes some kind of definitive statement. I don't agree and I think I have a strong basis to have a respected opinion. You can still loathe Geithner and hate realtors if that's an issue. But none of you know me.  You may never have met a realtor as good as I am and I don't mean in a financial sense. I mean ethically, hardworking and knowlegeable. If you have personal reason to despise a certain realtor you have my sympathy. I've been screwed by "professionals" too and it truly sucks. But I'm not them and never have been anything but the absolute top in my field in every sense. 

Sincerely,

Alex 

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#10) On April 26, 2009 at 9:34 PM, Alex1963 (29.33) wrote:

 tonylogan1

Great repy. I truly appreciate that you actually checked me out. That took time and I think was pretty cool of you. I think I answered your point in the reply above.

But I just want to add that not all of us realtors, or folks in any field, are necessarily motivated or cheerlaeading for every turn their industry takes just because they are "enriched". What bubbles also crashes. I have watched for years in bemusement at the huge up & downs areas of California routinely experience. Som of the top agents in RE make literally millions a year of net income there. But they also crash repeatedly and seemingly without warning. Too many factors invloved IMO. I thank the stars I live in an area of slow, steady growth. Nary a boom in sight. As a result we've weathered well here as in past downturns. I have been very critical of my industry and their policies of knee jerk opposition to any thing which could possibly hinder sales no matter how good for the country it might be. And I have mocked Lawrence Yun (chief Economist NAR) for years for shamelessly spinning the thinnest data imaginable to urge members to advise clients that it's a great time to buy, sell or listen to Mr Yun. It's EMBARRASING.

And I have always advised against homes being bought strictly as "investments" for any reason. If you're full time pro that's one thing but navigating the ups and downs is for very few. Tho I know some. I can't tell you the number of clients I discouraged from doing this. Some ignored me, bought thru others and did OK. More failed outright. Those that didn't before are in deep doo do now and I truly feel for them. I did what I could tho. Still do if they ask. Anyway, I would venture to say that most amateur single family home speculators do about as well as amateur stock pickers. It really helps to have the necessary time, be willing to do the necessary research and stay on top of events and so on. And you need "hedges" like a strong rental market and on and on. In case your intended flip.. flops LOL. it's tricky as S**t but people think "Hey it's real estate. I live in some real estate right now. I was born in some too, How hard can it be" Civilans LOL. Gotta love 'em. Just like stocks most people just don't have the disiipline or the "knack" and their timing can suck-just like the stock market. Or they lack the luck and believe me I've seen it RE just as it exists in the stock market. It just usually runs out. But I also don't blame my stock broker who mamaged to turn a fresh infusin of 240K in May '08 to $160K by Oct '08 either. Ask me about CAT, GE, or AAPL at $160 for god's sake! ARRGGHH But he''s been damn good for years. But ohh at 1st I was so PISSED. How did he not know. Didn't he follow Schiff & Whitney etc, Roubini? I don't know maybe I'm an idiot or soft but I honestly don't think many people really thought we'd get this perfect storm. Those that did don't seem to have capitalized too well because they either got out way early or predicted de-coupling and other yet to be realized scenarios. They pulled out altogether and missed some gains lately etc. 

The real estate bubble was also a symptom not just a "cause" as you stated, at least in IMO. Like a pneumonia when you have cancer already. It added severe strain to a terminal patient for sure. It might "kill" us all yet. I don't pretend to know. In fact the more I learn about finance, ecomnomics and word events the more I realize I don't know.

But my stock loss was my fault. I should have paid more attention and been involved. I was too busy with what I did understand - RE sales. That was and is to me alot of frickin' money and I should have been triple checking things out. Well here I am lesson learned. Minimal whining. Spilt milk. Still have my broker but now we speak often and I don't think he's always too keen. Imagine! And I really like it. Wish I'd done this years ago when I first took an interest. I'm a news junkie anyway! No phone always ringing and people FREAKING OUT. Market swings seem tame by comparison. Sorry, babbling.

But you can still disapprove of Geithner. I understand why many rationale & patriotic citizens do. There are plenty of good reasons to disagree with his professional career, history and current policies without ever needing, in my view anyway, to speculate on whether he thought he'd gett this preferential tratment you mention. That is quite a stretch there ya know? But if he is ever revealed to have done what you speculate or anything even remotely like that I'll join you and Abitare and half of Caps, in riding him out on a rail. I promise.

Yes I admire Buffet and think he's a rare breed indeed. Volcker I'm not too personally sure but again I see the attraction.  

But I'm still witholding final judgment on Geithner and have "hope" (dare I say the word) that we'll all get better news than we have a right to expect. We already have in some ways. When I 1st read CrashProof in November I was ready to cash it all and.. well you know. Not there yet. I thought it could actually be much worse about now. Many very smart people think it will yet. We'll see.

I'm still green thunbin' and have 50% of my "powder" wet and in the market God help me LOL. Doing pretty well for whatever reason. But the other half is on the sidelines. (may I not mis the next big run up oh gods of bulls and bears! Let there be one, too if it's not too much trouble)

Best to you Tony

Se ya round

Alex 

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#11) On April 26, 2009 at 9:45 PM, Alex1963 (29.33) wrote:

Abitare I feel I may be in danger of hijacking your blog. I apologize.  

Last reply

 jszoke01  No one I ever sold to as a buyer who selected an ARM without a full education from me on the options or failed to get my opinion on any better options FOR THEIR SITUATION. The specifics of what I helped them select, the terms, caps, indexes and options I insisted they choose are too complicated to answer and you can see how long winded I can be. If you are interested, stop by my blog with any questions and I'd be happy to answer. But if you're asking if my clients might be upside down and blaming me I highly doubt it. Hundreds of my clients know exactly where I live and my door is open. Any of them can reach me at my office and i believe would know I'd help them out of any jam they might be in. Nothing like that tho I could use the business or even the distraction. LOL. So my clients generally think I'm golden, thank you for asking. They also were shown more property than they could stand in some case to be sure they were educated on the market, and got my take on the inadviseabilty of buying for any guaranteed gains. I saw the signs early on and told my clients to be very cautious and I told my clients investors to hunker down and be prepared for some pain. Especially my apt building buyers, sellers and my many property management clients. In the face of near unanimous disagreement from every one in my field and most of the financial advisors, investors and "experts" I and my clients consulted with too I might add. Which sucked. Luckily I had no boss by then to answer to because I surely would have gotten an earful. 

Thank you for your question. I understand your skepticism (I think I do anyway)

Best of luck in your investing and other insane risks you may take!

Alex 

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