Originally Posted by JonInMiddleGA (Post 1946909)

I went into this in one of the TV related threads but it probably deserves a brief mention here too.

The latest forecast for advertising spending in the U.S. looks for 2009 to drop to the lowest ratio of advertising to GDP since 1946, in other words the tightest environment in the lifetimes of virtually everyone connected to the business.

Originally Posted by albionmoonlight (Post 1946932)

Good luck, man. "Worst in my lifetime" isn't good for anyone trying to make a dollar in a business.

Originally Posted by Flasch186 (Post 1948415)

I have begun to pay for pRon

Originally Posted by albionmoonlight (Post 1948414)

Beer Sales Suffering in Recession

I'm doing my part to keep the industry afloat guys, but I am only one man. We all need to do our part here.

Originally Posted by Marc Vaughan (Post 1948938)

I actually have a fair bit of sympathy for the chap - so long as he's sensible in his negotiations I'd have thought he's exactly he type of person a bank should want to help.

He's not missing payments and has a reasonable job - as such I'd have thought its in the banks interest to wrangle more interest out of him by extending his mortgage period from the initial duration by another few years and thus giving themselves more interest income during its duration.

Surely this is more sensible than renegotiation for people who have proven to be unable to plan ahead and realise they might have problems in the future and so are trying to cut costs somewhat now? - those people surely are the ones who are most likely to default.

Originally Posted by Marc Vaughan (Post 1948938)

I actually have a fair bit of sympathy for the chap - so long as he's sensible in his negotiations I'd have thought he's exactly he type of person a bank should want to help.

He's not missing payments and has a reasonable job - as such I'd have thought its in the banks interest to wrangle more interest out of him by extending his mortgage period from the initial duration by another few years and thus giving themselves more interest income during its duration.

Surely this is more sensible than renegotiation for people who have proven to be unable to plan ahead and realise they might have problems in the future and so are trying to cut costs somewhat now? - those people surely are the ones who are most likely to default.

Originally Posted by Mizzou B-ball fan (Post 1948941)

I was told I was stretching it when I got a $125K loan on a $45K salary.

Originally Posted by sterlingice (Post 1948943)

I think my college cost less than that after scholarships.

Originally Posted by sterlingice (Post 1948943)

I agree with that, Marc. He's trying to pay his bills the right way (sort of, tho running $70K in credit card debt isn't the right way).

The one problem I have is that there's no way anyone should be buying a house with 0 down.

And they sure as hell shouldn't be buying a home costing $550K on that salary, even assuming his wife makes about the same. Especially not with kids and a $10K per year high school. I think my college cost less than that after scholarships.

SI

Originally Posted by JPhillips (Post 1948969)

Regardless of the man's financial planning, this is precisely the kind of situation where it greatly benefits the bank to renegotiate terms. If they foreclose they'll be lucky to sell the home for 400K and they'll have the costs of foreclosure as well as all the costs associated with selling a home. Meanwhile the home is providing zero income for the bank while it's on the market.

There are moral hazards involved in redoing mortgages, but it's almost always better for the lender to keep payments, even if reduced, coming in.

Originally Posted by SportsDino (Post 1949063)

dola, let me pre-clarify to avoid confusion:

I don't want the government to give this guy money to stay in that expensive house.

I want the government to have some way where it can force banks to rework a mortgage.

The method of that reworking should be along the lines of:
- converting crazy ass loans into fixed term loans.
- extending the term of loans as needed to reduce monthly payments
- fixing interest rates to not adjust to the craziness caused by the current crisis... whatever the terms of the crazy contract may have been.
- void any overly harsh fees or clauses that are cleary designed to screw over homeowners in the banks favor, or make reworking mortgages harder.

The costs associated with such reworking is that banks would have given out loans expecting crazy clauses to increase their future value. I think that source of profit though is mostly evil in nature, banks trying to screw over consumers, so screw em in the earhole and tell the banks to eat the cost of having their precious fees and tricks removed.

Another cost is extending the term of loans does change risk profile of said loan. Although usually a longer term would have a lower risk rate in normal times, in this era there may be issues from having your money in the market for a longer period of time, but I'd say its an acceptable cost for handling the short term shocks to the system we are seeing. Longer terms also effects situations where the consumer may want to sell the house in the future, the government rework should clearly take that into consideration and prevent ways of reworking the loan that may make it too easy to offload the house at random prices in a recovery and screw the banks. This is why I tend to avoid changes to principle balance in this policy, ripe for exploit.

If the balance alone is enough to kill this house, which may be the case here, than I saw screw the guy. You are not entitled to irresponsible levels of credit and massive luxury in life. Hell I went through all sorts of shit just for having a debt of 5,000 (10,000 after bank tricks)... so I have little sympathy for people with 100 times the debt I had being mollycoddled.

Originally Posted by Mac Howard (Post 1949119)

and extend mortgages out to 50 years if necessary. Problem fixed!

Originally Posted by JonInMiddleGA (Post 1949126)

Or maybe not.

Where does it put us, long term I mean, if we're doing 50 year loans on houses that often quite literally aren't likely to last that long? A lot of these houses headed for default seem likely to be new construction and frankly, from what I've seen, a lot of them aren't likely to last 50 years without falling in on themselves.
No idea what it's like in your part of the world but here, construction quality has gone to shit steadily over the past decade or two at least.

Originally Posted by Galaxy (Post 1949163)

(on a $80,000 a year salary).

Originally Posted by SportsDino (Post 1945024)

A key part of the Japan lost decade comparisons that gets lost behind the 'more money, faster' tagline, is actually ripping the banks apart (in audits) and wiping out shareholders if necessary. The banks in Japan did not want that and held on until something had to be done, and the banks in the US are going to do the exact same thing.

Making the banks fail if that must be the case is a critical requirement of recapitalizing them. Default and get it over with, hell most of the equity in the banks is evaporating anyway with several major players less than half or in some cases 5-10% of previous size! (by share value).

Originally Posted by SportsDino

And where you see a deflationary spiral, I see necessary deleveraging. We only are printing money to obfuscate bad debt from bad decisions by bad leaders at bad banks. I've already argued before that we never saw the sort of inflated prices to match that massive leverage (did your loaf of bread cost ten times the price of 1990?), so the real result of printing money is going to be an increase in prices (now that everyone knows the wizard of oz is just some fool behind a curtain).

To even start to match all that super leveraged debt to avoid what they are terming deflation, you would need to quintiple prices, at least.

Originally Posted by Edward64 (Post 1950003)

Sheesh. What a day, shoot me now and put me out of my misery. Let's nationalize those banks (and big 3 while we are at it) and get it over with.

Originally Posted by Dark Cloud (Post 1950303)

Here's a local story.

'Homeless in 2 weeks Please help!' :: Beacon News :: Local News

Originally Posted by Horse that is Jesus

(CNNMoney.com) -- In speech after speech, presidential candidate John McCain hammers on the claim that his rival Barack Obama will raise taxes on many small businesses.

At the debate on Wednesday night, McCain said, "The small businesses that we're talking about would receive an increase in their taxes right now."

More typically he has said: "What [Obama] hasn't told you is that he would tax half of the income of small businesses in America," a line used in La Crosse, Wisc., last week.

Should small business owners fear for their wallets if Obama is elected? Not the vast majority, business and tax experts say.

To make its claim, according to a McCain spokesman, the campaign counts as a small-business owner any taxpayer who files a Schedule C, E or F - the forms used to report gains and losses from business ventures and farms.

Using that definition and citing IRS data, the campaign notes that "56.8% of total small business income is earned by businesses in the top two rates, which Barack Obama has pledged to raise."

It's true that Obama has proposed raising taxes on the top two income rates.

But there are three main problems with McCain's charge.
What is a small business?

First, it relies on a broad definition of what counts as a small business, including everyone who files a Schedule C, E and F.

But most people who file those forms don't run a business for a living: Those forms are also used to report income from freelance and consulting work, real-estate rentals, and most other non-salary sources.

For example, McCain and Obama both file Schedule C returns, thanks to their book royalties - but they hardly should be considered small business owners.

In 2005, there were 21.5 million Schedule C returns filed, according to the IRS.

A more realistic definition of small businesses turns up far fewer firms. The Small Business Administration estimates that there were 6 million small businesses in 2005, as measured by those with fewer than 500 employees and with staff on the payroll other than the owner.
Who pays?

Second, even using the broad definition of small business that McCain likes, very few owners would see their own taxes rise.

That's because the lion's share of taxable income comes from a small number of wealthy businesses. Out of 34.7 million filers with business income on Schedules C, E or F, 479,000 filers fall into the top two brackets, according to an analysis of projected 2009 filings by the nonpartisan Tax Policy Center.

The other 34.3 million - or 98.6% - would be unaffected by Obama's proposed rate hike.

That includes Joe "The Plumber" Wurzelbacher, whom McCain invoked nearly two dozen times at the debate Wednesday night to illustrate the plight of the average worker and small business owner.

"Joe wants to buy the business that he has been in for all of these years ... he wanted to buy the business but he looked at your tax plan and he saw that he was going to pay much higher taxes," McCain said.

In an interview afterward with WTOL, Wurzelbacher acknowledged that he'd still like to eventually buy the plumbing company he works for but that he wouldn't yet be hit by higher taxes.

"I want to set the record straight: Currently I would not fall into Barack Obama's $250,000-plus," he said. "But if I'm lucky in business and taxes don't go up then maybe I can grow the business and be in that tax bracket - well, let me rephrase it. Hopefully, that tax won't be there."

Few owners are that lucky in business. In a member survey conducted late last year, the National Federation of Independent Business (NFIB) found that only 14% of respondents said they had $200,000 or more in annual income.

As Tax Policy Center fellow Len Berman recently told Fortune Small Business: "Most owners of small businesses have small incomes."
What gets taxed?

Third, even if you're one of the rare business owners making enough money to be affected by Obama's proposed tax increases, you still won't see a big hike in your tax bill.

McCain's claim that Obama "will increase taxes on 50% of small business revenue" - the line he used in the second presidential debate - is incorrect because of how income is taxed.

If a business owner falls into the top bracket, that doesn't mean that all of his or her income is taxed at the highest level.

For example: If a small-business owner makes $210,000 in taxable income, he edges into the 33% bracket, one of the two top tax rates that Obama would like to raise.

But he would pay the higher tax only on the amount that exceeds the cutoff - in 2007, the two top tax rates applied to single filers with income of $160,850 or more and joint filers with income of at least $195,850. As a single filer, this business owner would see his federal taxes increase $1,475 under Obama's plan, which calls for raising the 33% tax rate to 36%.

"While Obama does favor raising the top two rates, the quote is not true because not all the small business income of those in the top two rates is taxed at the 33% and 35% rates," said Gerald Prante, a senior economist at the nonpartisan Tax Foundation.

The bottom line: McCain's claim only works by using an overly broad definition of what counts as a "small business" - and even with that definition, fewer than 2% of business owners would be hit by Obama's proposed rate increase. For those who are affected, the increase would be levied only on a part of their earnings, not all of them.

Originally Posted by Flasch186 (Post 1950519)

it was a reference of the statistic within the article of what $250K (which is the number he has recently mentioned) means....history didnt start in November.

Another amazing or mind boggling thing to me is that what SFL fails to mention is that Obama has stated he'd do this when the economy recovers and not during the recession, at least on everything ive read and heard so perhaps he read or heard something different.

Than those opposed to all the money spent on recovery usually mention inflation and deficits so you'd think that they would see this other side of the scale as being a good thing to counteract the expenditures now, no? well, no....