Steve Syre's housing report

" The Boston business report with us each and every day in today's edition of the bust business report with Steve sat. Is brought to you by SB life savings bank life insurance is Tedy Bruschi each choice. -- insurance Steve side how are you today."

" Good morning guys hey speaking of the -- Q do you book based on what you said before is in the picture is up of the Romney houses built. David -- right now that it. The US is delighted and mark and see that it -- is -- an -- and don't bought it looks and get my youngest. And I'm gonna talk pink house for three million dollar."

" you know would that would go with -- go much much better on Waikiki beach next to the royal Hawaiian yeah that'd be like the or maybe apartments to presidential annex a -- opera may yet beat out."

" When I think you're missing your collection amassed since ninety. That the picture of the book his place in -- is jest can you believe that's down can you believe the lodge -- observe that -- That it like what others resort where they have the spot you know you're you're going for your massage and collapse skiing. --"

" The Rockies have the spine that house they just don't allow anyone to you know -- there are afraid that somebody -- hair behind a but it's -- While to -- improper is no question about it pasty -- you've got a great column today in the globe but coming attractions. You think governor might be diamonds are a president might be doing a little nifty scheduling. To try to while overshadow some statistical reports c'mon it's an economic data what's gone on this week."

" Probably is about to stop their the thing you're talking about is there's report later in the week. New housing starts which are going to be awful but he's taking had dated two come out with this plan of how he's going to try to. People are on the perjury in the process of foreclosure and I think is going to take advantage of of the really rotten. Home statistics -- to push through the point that you know something needs to be done right away although it has a little bit of a disconnect between foreclosure in new home starts but it set. They didn't allow the housing statistic that's when it comes down to that's that's one element what's going on this week the other thing is about prices both. Wholesale prices and and retail prices the Consumer Price Index and is that the really startling fact this week although the individual number for January which is what's. Do that it will show on the consumer price level a twelve month stretch in which. Prices actually went down very slightly in the tiny number but it's the first time in a twelve months stretched. The prices have gone down on the consumer level since the 1950."

" I was wondering about this is that good sign in terms of where we're -- her bad side."

" I think in the short term it's fine I think you know people are worried about deflation now prices going down. A lot. Really a long slide. Yeah and that becomes ultimately bad. You'd take out the prices that lower prices that's. Good for me I'm gonna gonna tell you know for a period of time but. Deflationary cycle becomes. Really really. A difficult problem for an economy that's struggling. You know everybody basically sit around and wait for the next lower price. Doesn't spend any money that things get worse and worse and deflation ultimately becomes. The kind of thing that they worried about Japan that work but the problem and other really deep intractable. Economic circumstances and so as a phenomenon has a long term thing it's a really bad development."

" So historically low while on housing stats. A very worrisome development on prices you once again -- boat load of good news -- let me ask. You got it. You know when devout and I'm sorry when Iraq does his housing rescue plan of 50000000900. Billion whatever the -- the price -- going to be these numbers -- by the way. To my mind how how does it not further distort. Home lending. If he proposes giving bankruptcy judges the ability to rewrite. Terms on notes how does a banker then realistically. Ever make alone unless they go back to the old 82 -- and its 20% down and they get a hold the note. Because an -- lonely land locally as the post on a broader basis I I I just don't see how it's going to heaven than about a negative effect on homeland."

" Well I think it'll make it more expensive but I don't think it'll make -- be as drastic differences as you point out you. Although people aren't sure what Obama's gonna say this week. I think you rightly point out the main issues one is that I think he's going to use. Some money to buy discount rate for people that they'll be government assistance that you can. As sort of get a lower interest rates he did but. At the same time there's going to be a lot of people who don't necessarily look attractive even after that that they're going to be seen as. Bad credit risk and part. And that basically judges can cram down. The terms a mortgage loan and essentially rewrite themselves. They've become broadly more affordable and this is something that hasn't happened that there are lots of other contracts. That routinely get pictures -- rewritten. And bankruptcy mortgages haven't at a big effect on net but. It seems to be that that's what'll happen. But what a worker's point of view. To look at this and obviously going forward is more -- there's more risk in the system. That it happened before but the idea that you're not going to be able to resell these loans and that they'll be very local -- you know the system in the past due to its great. Deficit. It was going to take all kinds of risks in Pakistan. And south Lamar the two investors all over the place so. But eventually I think that won't stop that process when does securitization market eventually recovers to some degree. But they'll be a price that comes with that increase stress."

" Steve what's your reaction to their -- these suffering -- characters always have their conspiracy theories and and one about the financial meltdown is that this was. Deliberately pushed by people who wanted to change things in the United States. Do you see any way that that kind of manipulation going on."

" You mean at the whole -- that was some sort of --"

" Oh -- trigger you trigger some kind of problem in in one institution -- one element of the economy and that leads to this kind of domino effect that we're suffering."

" I think. What you see big to be that domino effect in the big picture. What you're seeing more than anything else is. The ultimate result of a credit system borrowing. That around the world and an all kinds of different forms. Became gigantic and it's the nature of credit that. In a cycle like that. It's available everywhere until it visit and then the psychology completely. Flip flop it's -- do emirates and on off switch. It's there for all you want until it is and then there's not. And I think that's and that's rippling through all kinds of things if you're gonna say. Was there one element above all else that created that I I think it was so that you know the cheap money coming out of the Federal Reserve through. You know the first half of this decade but. No I wouldn't subscribe to any conspiracy theory that said that. That that's it was something that was completely manipulated for the purposes of of political change to get that right is that the."

" I mean it's it's certainly sounds plausible to my year I think it you know I say this -- hindsight. But it seems now perfectly predictable that in a system in which are going to socialize all the risk. And privatize all the profit this was going to be inevitable. It was just there is that you'll get further and further and further out on the limb because it is no it's really not limb for them there's no announce."

" You see the kind sixty minutes whose feature this week I did not they had they had a guy what does that back on California World Bank or something like that it was call. World national some name like that it eventually got sold to Wachovia. And then they they interviewed this guy who was a loan officer there and eat a few years ago. It Golden State is what the parent and well they -- world that something may be most subsidiary bank but -- I think Golden State I mentioned as well anyway this guy talked about on his bosses and we can't do these loans were committing acts of fraud here work. -- basically used describing how loan agents were under such pressure to convert. Customers into mortgage holders that they were just doctor the numbers they were just write down anything for what the person's income ones and everybody in the system went along with -- and this one guy was blowing the whistle. And you know he got eventually a fire because they don't want to hear what he had presided for competence if you can -- I -- and it's -- console anyway this -- the -- into anymore reading on because I just watched this last night. But what the sixty minutes piece was was indicating was that. This one bank being taken over by Wachovia which say they pay 25 billion for it and had 35 billion dollars worth of bad debt. That you know of losses that had to be covered by this federal money and that the sixty minutes was indicating these guys are why Wachovia went down. In this guy's saying if only I had the old -- and of only -- Wachovia when their -- and it maybe that's when that happened but it's appoints opera carry us the whole system minutes."

" It was in in in in in that particular is circumstance and there were. Real hot spots where we're at these things are taking place in California was one of the big. Hot spots where and there was just. So much money to be made that by doing these things and people who were eventually on the end of the process the people. Buying the -- these loans that you're talking about that we're being. Created Indians in California and in this case were being held by this bank often. Packaged by places like Lehman Brothers in New York and then sold to lots of investors in many cases to other banks whose securities as well. You know that in the end the owners of these securities work. This just oblivious to thinking very hard about what they were actually buying yen in a lot of cases we talked about you know these. All day long liar loans where there's essentially no documentation where. It will just assume that the collateral was going to protect us and you know we don't care what you say about your income and your if your other financial status and we're gonna rely on. On the collateral or protecting us which is a system that has collapsed in the past the idea that you couldn't see that coming. Was crazy right here in our own back yard. It in the late eighties and early nineties in a smaller version of this there were you know. But they just called note doc loans -- we have a clever enough name like liar loans back then but the same type of thing happen before it's it's predictable greedy and to a bad."

" It is really sick you know Steve it's an I continue to have this picture in my mind of just -- important packages of dry -- And just moving it around the the world to the economic and credit system will capital system. Yeah in dressing that -- local banks did not seem to get caught up in a very much beyond hold on Fannie Mae or Freddie Mac securities. But other than that I think the S got to issue that you mentioned from the late eighties and early nineties as well as a good regulatory system running -- some pretty strong commission has. Have probably kept the wolf from the door via."

" Yeah among the smaller banks and in terms of independence that's pretty much what we have left at this point. They have remained. Pretty clean -- on on this issues you point out correctly a lot of the smaller threats had a lot of Fannie and Freddie preferred and I typically when they had. -- it investment portfolios. That was the type of investment that was actually. They encouraged as a safe and sound investment by regulators that -- Freddie preferred. And so that's one of the reasons when you look at these. Part list where it gets down to the local players and UC. You know this bank getting ten million in his bank getting 25 billion. Typically they're the ones they got that money weren't getting it to plug a hole because they got whacked over the head on there Fannie and Freddie."