Countrywide, Merril Lynch, Morgan Stanley, and even our own Washington Mutual have been claiming huge losses this year due to the sub prime morgage melt down. It’s bad loans, and foreclosure on property that are the culprits. Bad loans can mean so many things.
Did you pay too much for a property? Did you get an adjustable rate 100% financing loan? Can you not make the payments because you lost your job? Maybe your job was at a mortgage company that has shut down.
Now I kind of know how financing works. What I know about banks and lenders is that they don’t lose money. Money is a tangible, like houses. In Morgan Stanley’s report today while they were writing down loans, whatever that means, they are enjoying:
For the full year, Morgan Stanley’s profit plunged 62 percent to $3.44 billion from $9.10 billion in 2006. Revenue fell 6 percent to $28.03 billion from $29.84 billion in 2006.
That’s profit and revenue.
Suze Olman (sp?) said in her TV program not to buy a house at more than 2002 prices. That’s a good idea. When a bank sells a house for less than is owed they still end up with money to invest. The bank is not an individual who may have put all of thier moeny in a house. They have lots of houses. In the end the bank either ends up with cash, assets, or rental income.
A person a Washington Mutual told me he was not going to sell a house for five years. The bank is going to rent the house out. Let’s look at the over all worst case scenario. The bank rents out a bunch of houses, sells some for cash to service debt, and sells some for evens, or a little profit. Where’s the harm to the bank?
If you read through my blog you’ll see I think there is a global migration to this country. The people of the United States also have an option to move to cheaper countries. Some people on Social Security can live well elsewhere. Some people who have money in other currencies see a bargain in the United States. All together the demand for housing units continues to grow.
Are there bad ideas? Do some construction projects suck? Should a bunch of houses be torn down? Sure there are many things that might happens. What I know is that for the past few years banks have made staggering profits. In the big scheme of things, it’s my opinion that the banks took a calculated risk. Right now things are evening out, but the people who will lose money are the people losing thier home.
