69 Mallard Drive
That was then, this is now
When this place was listed as land in September 2004 at $899K, it sold via a bidding war in mere days for $952,500. Ah, 2004! The new owner built a spec house and in November 2005 offered it up at $2.575 million. It took a year (usually a sign of trouble, no?) but it eventually sold, in November 2006, for $1.960 million, or 76% of its asking price. That's a reflection, I think, not of a crumbling market but rather the house's location on a busy street; for the most part, 2006 was a good year for real estate. The buyers seem to have forgotten this lot's history and must surely have cut off their newspapers and stopped watching the news because they've listed it today for $2.495 million, 27% more than they paid for it back then. I wish them luck, naturally, and I'm awed by their optimism.

12 Druid Lane, Rvsd
Nice house, but not selling
This new house has been officially on the market since April 2007, but was only finished in June of this year, which is usually when the clock starts running (few people are willing to buy a hole in the ground but it's nice when it happens). It's been priced at $3.850 until today, when it dropped to $3.550. That's probably a little aggressive, but it's a nice house on a good street so I think market conditions are more to blame for its failure to sell than its price, although these days, some very nice Riverside houses are climbing down into this price range and the competition is building.
One drawback, perhaps, is the builder's decision to drop the house below street level. He did so because he's a thoughtful guy and didn't want his house to tower over its more modest neighbors but, in my experience, buyers hate driving down, even a few feet, to a house. Too late to re-think that now, unfortunately. Nice guys finish last?

This so pleased my liberal friends that I thought I'd share it with readers.

I lost again!
Damn contest is fixed, obviously.
MacArthur Genius Awards Announced

Why aren't I popular?
I'm tired of being chastised for my negative views so from now on, I'm going to try to write articles like this: Real Estate Sales in the Sunshine State are Going Great!

Camel's nose under the tent?
What I don't like about the trillion dollar payoff
By nationalizing our banks, we're setting the stage for another very long step towards socialism. This bill will regulate the salaries of executives who take the bailout but Barney Frank wants more, he wants Congress to
set the pay of every executive in the country. Today's assault will be just the beginning, according to Frank:

On CNBC early this afternoon, Frank said that the initial moves to limit pay and golden parachutes at firms which receive government help are only a first step. He said the current negotiations would also “lay the groundwork” for plans next year to place restrictions on executive pay on all US companies.

One of the most influential books I read as a young tot was Friedrich Von Hayeks' Road to Serfdom, in which the author, having had a close up and personal look at collectivism, both in the Soviet Union and Nazi Germany, warned that socialism led inevitably and logically to tyrany. Like Al Gore, Von Hayek won a Nobel Prize but I suspect that's the only thing the two men have in common. And I doubt that Barney Frank and his cohorts getting ready to pull this fast one on us ever read it, either. If they did, they're using its precepts as a roadmap to seizing power.

You don't have to be an Einstein to deal with this market
The owner of 40 Sawmill Lane paid $6.0 million for his house in May, 2006 and put $500,000 in improvements into it. He is now buying a house in another town and asked his agent, Julianne Ward, what price would sell it. The result is that he's written off the cost of his improvements and priced it just below where he bought it: $5,995,000. Who knows if that's going to do the trick but the seller is obviously smart enough to know where to begin and, as suggested here yesterday, he's looking at the total picture: he may get nipped in his sale here, but he's saving a bundle on his new house up the coast where the market has been hit even harder than in Greenwich. So he'll probably come out ahead of the game or close to even, which is not a bad result today. Hats off to him.
40 Sawmill Lane

504 North Street
Another price cut on North Street
This spec house has enjoyed an interesting pricing history. Originally listed for $11.795 in November '06, it was bumped to $12.960 7 months later. A year after that, the new higher price having inexplicably failed to produce a buyer, its price was reduced to $11.995 and today, 6 months after that drop, it's been cut $1.4 million to $10.595. What's the right price? Obviously its builder doesn't know but, eventually, the market will tell him.

22 Indian Head Road
Open House Report
I didn't mention any houses I saw on Tuesday's open house because I'm not mean enough to give my opinion about some houses. But the house pictured above caught my eye today. Originally listed for $2.695 million in April, 2003, it took until January of the next year to sell, at $2.4 million. In a strong market, that was some evidence that there were "issues" with the house. Its cramped flow, the graveyard behind it, whatever. The buyers then are the sellers now and, although they've done nothing I can see since their purchase, they've marked it up a million bucks and offer it to you for $3.4 million. It's entirely possible that I missed certain hidden charms here and that it will be snapped up by an eager public but I look down the street at what's available for $3.6 million and consider other houses in this price range and I, for one, wonder what on earth these people are thinking. Still, everyone has an opinion and mine is no more valuable than anyone else's. For all I know, this could be somebody's dream house, just waiting for the right buyer.

Dear Editor: I view with concern and alarm
State of the market
Brother Gideon writes,

I keep running into listing brokers who are getting "ridiculous" offers on their houses. Seems like people are trying to buy but Greenwich sellers aren't impressed.

All very possible - I don't know, obviously, what these offers were, and I'd advise you to run your potential offer past a good agent to see whether you've veered across the line from painful but acceptable into, "see you in Hell" land.

What I do know, however, is that I passed along some offers a few months ago that were scorned by sellers as beneath their dignity to reply and, today, those offers would look pretty good. So ....

Off to the open house tour. A quick look at the hot sheet seems to indicate that sellers still aren't getting it, but perhaps I'll be pleasantly surprised. If so, you'll read about it here, first.

OwlGore urges
civil disobedience to stop construction of coal-fired power plants

I assume that he'd like to see us emulate England, where vandals were recently acquitted of trespass and violence on the grounds of "self defense" - they were, according to a British jury, just trying to save their own lives and that of everyone else in England by ending global warming. Gore, by the way, approves of this violence at any plant, anywhere in the world, thus distinguishing himself from that other great orator, Joe Biden, who supports coal-fired plants so long as they're in China or India or some godforsaken place populated by foreigners.

What struck me about OwlGore's speech to young terrorists, aside from his advocacy of shutting down the world's power supply, was this:

"I believe for a carbon company to spend money convincing the stock-buying public that the risk from the global climate crisis is not that great represents a form of stock fraud because they are misrepresenting a material fact," he said. "I hope these state attorney generals around the country will take some action on that."

Now, the man did attend law school, even if he borrowed Teddy Kennedy's notes, so he should know that our Supreme Court has long recognized the right of commercial entities to engage in free speech; his desire to see "carbon companies" (by which I assume he means most businesses in the United States) hamstrung by lawsuits in 50 states (or 57 states, if Obama's right)seems a bit ... ignorant, therefore, if not malevolent. According to Gore and his friends, the debate over global warming is closed and anyone who says otherwise should be prosecuted, but those darn scientists keep coming up with data that suggest otherwise.For instance, yesterday's NY Times reported that the permafrost isn't melting after all and in fact, has survived numerous periods of warming before. According to scientists, (reported by my cousin Henry Fountain but I assure you, Henry is as on board with OwlGore as the most befuddled college freshman) the ice up there has hung around for at least 740,000 years.

But Gore did win the Nobel prize, they tell me, and he's got the 100', diesel powered houseboat to prove it. What a guy - can't we persuade him to be our president? Air Force One may be a tad smaller than his current jet but when it comes to sacrifice, Gore understands. And when he doesn't, Barbara Streisand can explain it to him.
Streisand Eco-Cottage

Rain on the parade?
7 Dwight Lane
This place is to be sold via IRS auction Friday at noon, minimum bid $2.5 million. I reported before that the auctioneer claims his only problem is that he only has one of them to sell and that buyers are lined up out the door. Maybe. I'm going early, with camera, and hope to interview potential bidders. I'll report back on what happens and what sort of pharmacological inventory they used before bidding.

15 Shoal Point, Rvsd
The acid test
This house sold, finally, for $3.275 in 2005, $1.0 million less than its deluded builder originally asked. It's newly back on the market, asking $3.3 million. If the "15% off 2005 prices" theory is accurate, the selling price should be $2.783. I hope that, just this once, I'm all wet and that the house sells for a new record. It's right up the creek from me and as that great tax cutter JFK once observed, "a raising tide raises all ships".

When in danger, when in doubt, run in circles, scream and shout
The Wall Street mess
Rather than pass out a trillion dollars to the same wonderful folks who strove so mightily to bring about our and their own ruin, why not cut taxes by the bucketful and see what happens? I bet we grow our way out of all this. And if I'm wrong well, just think how cheap Greenwich real estate will be.

For a more cogent article along somewhat the same lines, try this.

It could be that a Congressional rejection of the bailout proposal, rather than clogging the markets, will unclog them. If Congress goes home having sent financial institutions a clear signal that there will be no bailout of any kind, then sellers will bring their securities to market, and we will find out what the market thinks they are worth.

In the worst case scenario, the market will assign low values to the securities. Firms that are sufficiently capitalized to hold mortgage securities will earn profits at the expense of weaker companies that have to sell securities or go bankrupt. In the end, it may turn out that the winners really took advantage of the losers. That is capitalism at work in financial markets.

Or this:

"I must tell you, there are those in the public debate who have said that we must act now. The last time I heard that, I was on a used-car lot," said Rep. Mike Pence, R-Indiana. "The truth is, every time somebody tells you that you've got to do the deal right now, it usually means they're going to get the better part of the deal."

(I suspect that you can profitably use Rep. Spence's advice the next time you talk to one of us real estate agents, too).

83 Riverside Avenue
You missed this one, too
I wrote about this Fran Ward (Shore & Country) listing earlier this summer, praising it as a good deal. It started in May at $1.750, which wasn't crazy, and dropped to $1.599, so I suppose (contract prices aren't reported, only sales)that it went for somewhat less than that. This was the old stable/carriage house for a larger estate and had been completely renovated. Not for those who insist on the very newest of new houses but it certainly matched my taste; I'm delighted that someone else agreed.

Peter Tesei
Okay, that's not really our First Selectman pictured here but the poor ol' guy was panhandling on the Town Hall steps and I felt sorry for him so I posted his image - he'll feel better now, I'm sure, once he gains access to a computer and sees his smiling visage.
Anyway, I did hear Mr. Tesei speak today and he did an excellent job discussing our town's budget and a number of problems afflicting Greenwich. I came away thinking we're in good hands, even if I did vote for his opponent.

Tesei told us that Greenwich sends Hartford $600 million each year in taxes and gets back $5 million. This is particularly distressing because, just the other day, I heard a panel discussion of certain liberals bemoaning the fact that cities like Waterbury hit their citizens with property taxes 5X greater than Greenwich. The solution, according to these redistributionists, was to tax Greenwich more heavily. They ignored the one commentator who pointed out that, while Connecticut's population has decreased over the past two decades, the number of municipal employees has increased 39%. Why cut spending when there's a golden goose down the road, just waiting to be plucked?

The answer to our declining schools, Tesei suggested, was to bring some accountability to the School Board (which, by charter, Tesei can't control). Right now, our two political parties each put just two members up for election every other year and, by default, they are elected. The parties could select 4 candidates and create a real contest at the expense of making the incumbents nervous. Tesei seemed to think this was a good idea and so do I. Go put some pressure on your local Democrats and Republicans and consider running for the Board yourself. And don't forget to toss our current superintendent, Betty Sternberg, out of office next year. She's not to blame for everything bad about our schools, I suppose, but heck - it's a start.

Diane Fox, P&Z head honcho, also spoke. I usually disagree with everything the lady has to say and today was no exception. If she has her way, and she always does, watch out for new, stricter requirements for elevating additions to houses along the waterfront. Ms. Fox has smoked a bit too long from the Al Gore bong and seems to think the sea level is going to rise 50' next year. Fortunately, she'll be there with her regulations to save us.

She also wants to see "affordable housing" apartments built along the Post Road and in downtown Greenwich all for the purpose, she claims, of providing housing for our municipal employees. This is a crock and I suspect she knows it. When pressed on the issue of who, exactly, was going to occupy this housing when cops, firemen and teachers all seem to want what everyone else does: a single family house with a backyard, Fox fell back on 'elderly". Nothing against old folks downsizing, but I wish our town planners would be honest enough to admit that that's who we're building for instead of casting these projects in the glow of a "we're providing housing for our workers" argument.

30 Bayside Terrace
You missed it
When this house (building lot, really) dropped from $2.495 to $1.6ish, I brought it to the attention of every builder and home building client I knew; to no avail. Two other agents who, like me, grew up and/or live near here experienced the same lack of success. Janet Milligan and her client were smarter and now the place is under contract. Riverside waterfront, even Grade B waterfront, will never again be so cheap (I say, hopefully, as a Riverside waterfront owner). Whatever, it was a great buying opportunity.

No surprise here
Existing home sales fell 2.2% in August
Raveis's Greenwich mortgage officer, Mark Hawkins, says that Connecticut appraisers are noticing that house prices have stopped falling in areas outside of Fairfield County. The hope is that we'll soon see that same phenomenon here but I find it a little disturbing: traditionally, Greenwich is the last to feel a real estate downturn and the first to emerge, so something odd's going on - can you say, "collapse of Wall Street"?
Update:
Prices aren't doing so well, either, according to Bloomberg

Get out your checkbook?
Some readers have complained that I'm boring them with reports of price reductions but I keep harping on this subject because it's such a good indication of what's happening in the market and, as a bonus, illustrates the perils of over-pricing your house in the first place. So here we go again. Bored readers are invited to turn to other blogs and return later.
20 Langhorne, an as-yet-unbuilt mansion, has dropped from an asking price of $14.900 million in March '08 to $10.998 today. Same house as promised at the first price, you can now save $4.0 million. I'd offer still less, just to test the waters.

8 Hobart, new construction, has dropped from $7.8 in July to $6.995.
29 Byfield, a financial disaster in the making, was reduced an additional $500,000 today. It started at $9.495 in April, it's down to $5.198. If it doesn't sell now, look for it at auction.

I mentioned 38 Langhorne, unimproved (except for a new septic system) land on Monday questioning how it could be worth $1.2 million last year and $4.15 million on Monday. Coincidence or not, the owner, Mark Mariani, lopped $1.0 million off the price today and now offers it at $3.15

89 Perkins was priced at $5.875 last September and didn't sell - apparently I wasn't the only person who thought its price was ridiculous. It's been dropped $1.5 million and is now asking $4.375. There are still, to my taste, some serious layout issues, but at least the price problem is being addressed.

Fire Sale

So you want to sell your house
A man much wiser than I (a low hurdle), one who's made millions in residential real estate over the past 35 years, told me recently that he saw a house in Florida much larger and nicer than his own, selling for 50% of its original asking price. He sold his current house by cutting 15% off what he paid for it in 2005 (and ignoring the money he'd spent on improvements) and made the deal. His thinking was that, yes, he was losing money on his sale, but was buying a much more valuable property at a bargain price, thereby more than making up what he'd "lost".

That makes sense to me, especially the part about cutting 15% off what your house was worth 3 years ago. And if you can take advantage of this market to switch to a nicer house, so much the better. Money is fungible, after all, so in evaluating your own house sale, pay attention to the other end of the transaction and see whether you net out ahead of the game.

If you're not planning on buying another house but still want to sell your existing home, that theory is still a good idea. Use a good real estate agent to provide the market value of your house - owners themselves tend to be too emotional to do this objectively - then price it at least 10%, and maybe even 15% below what houses comparable to yours are asking. You may have to cut your price still further but at least you'll get the attention of every buyer out there. Yours will sell, while your competitors's linger.

Most disgusting headline of the year
PETA urges Ben & Jerry's to use human milk in ice cream.
My personal theory is that Bush and Cheney have infiltrated PETA and now are turning it into the laughing stock of America, thereby destroying it. Good riddance.

1 Butternut
This one's not on North Street but it's a spec house that was built and listed for $5.895 in April 2005. Still empty,it's available today for $4.350.I don't mean to tell you how to spend your money, but there is a growing number of houses out there that, bought now, are going to look like real bargains down the road. How far down the road? That's the unanswered question that's currently wreking havoc on the market.

A reader asked for a survey of unwanted spec houses for sale on North Street. I found five active listings (plus a bunch of expired which may soon be back).

480 North. Original price $9.5 million, now $5.495, for sale since July 2006.
504 North. Original price 11.75 million, now increased (?) to $11.995, for sale since November 2006.
537 North. Original price $9.995, now $8.25, for sale since May, 2006.
620 North. Original price, $6.390, now $6.4 (?!), for sale since April 2008.
969 North. Original price, $12.750, now $11.5, for sale since July, 2005.

My guess, based on driving around town and seeing a number of jobs nearing completion, is that we'll see more, rather than fewer of projects like these coming on the market. That can't be good news for builders.

What about commercial property?
12 Grigg Street, just off of Greenwich Avenue, is listed for $2.495 million. It's on 0.10 of an acre and has two parking spots. I don't know much about commercial real estate in Greenwich (other than that the big guys insist on being directly on the Avenue - they don't do "around the corner") but this seems high to me. I'll watch its progress and we can learn together.

How low can they go?
Here's a new, exciting blood sport: what's going to happen to all the spec houses in our fair town?

537 North Street came up for sale May 6, 2007 for $9.995 million; it can be yours today for just $8.25. Tomorrow?

"Please, sir, may I have some more?"
Can't we just shoot these guys?
The New York Times reports that the MBA Wizards, not content with a trillion dollar relief package that will bail them out from their stupidity, are scrambling for more. Ugly.

One last shot (for today) at some of the hypocrisy now flowing from Washington
From Kevin Hassett, writing in Bloomberg.com

Greenspan's Warning

The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

Different World

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

53 Park Avenue South
Beauty in the eye of the beholder
I've long held a sneaky sort of admiration for the builder of this house because he defied convention and built what he wanted. The only trouble with such defiance is that, eventually, the time comes to sell the damn thing. This Old Greenwich property has dropped from $2.777 million to $2.075 million and still won't move. Either the "right" buyer will finally show up - a rarity in this business, despite what many sellers want to believe - or the price will reach a level that spurs someone into action. Either way, there may be a wait.

Langhorne Lane
One of the most successful Realtors in Greenwich (well, that's my little brother Gideon, but never mind) has commented that the Antares fiasco on Langhorne Lane still resulted in the highest price ever paid for property on the street. Considering that the houses there are mostly rather shop-worn contemporaries, I'm not all that impressed, but others obviously are.

Take, for instance, 38 Langhorne. It came on the market 3 years ago for $2.250 million and finally sold in January 2007 $1.250 million. The new owners tore down the house that graced it, stuck in a new septic system and have returned it to the marketplace for $4.150 million, thus setting a new record for a septic system on the street.

Not to be outdone, the owners of 20 Langhorne have done nothing to the property they bought for $1.9 million (the original asking price was $2.950) and are now asking $2.995 million. Go for it guys - let me know how you make out.

Courtesy of The Blovina Bloviator, here's a picture of the Chairman of the House Ways and Means Committee, relaxing after a strenuous day of cleaning his four rent controlled apartments and flying down to his spot in the Caribbean. This gentleman will be writing your tax laws for the next four years, with Nancy Pelosi's approval.

You ask, I'll Google
(from the comments):"Chris, where is a link to the Greenwich Times article which quoted Livvy Floren as feeling bad for the Fulds? She got ripped on those boards for those remarks."

Here's the article, and here's the quote:

The town is home to longtime company Chief Executive Officer Richard Fuld Jr., whose friends and acquaintances from the financial services industry said had spent his entire 39-year career building Lehman Brothers into the nation's fourth-largest investment bank - only to see it pushed to brink of extinction.

"I feel sick. That's been his whole life," said state Rep. Livvy Floren, R-Greenwich, a friend of Fuld. "You know his heart and soul is in that."

Floren said Fuld and his wife, Kathleen, have been active members of the community and have generously contributed to groups such as the Greenwich High School PTA and Greenwich Country Day School, where their children spent their early years. They have opened their North Street home to parties for the GHS field hockey team, she said.

"I've just always found them to be really delightful people, so low-key and unassuming," said Floren, a former president of the GHS PTA. "I really feel so badly.

I don't see any reason to rip Ms. Floren - she's his friend and is doing what friends are supposed to do, stand up for them in times of trouble. The rest of us who aren't his friends can observe, objectively, that the guy completely ignored his responsibilities as CEO and destroyed the careers of everyone under him. Dummy.

"One of the great mansions of Greenwich’s 300-year-old history”
On second thought ....
Antares' great mansion has been sold (I believe as part of a settlement of a lawsuit) for $13.750 million, hardly chump change but a bit less than its original price of $25 million. Both prices, by the way, were for a shell of a house - the buyer is expected to add his own necessities like kitchens, baths and light bulbs.

When questioned about this precipitous fall of one of the future great mansions of Greenwich, Antares' principal Joe Beninati was eager to dispel the notion that Antares had blundered.

"You see a long term capital loss," he explained, "but you're wrong. We pulled off a tax-free exchange: we got rid of this ugly pile of stone no one wanted and got back a ton of Lehman Brothers stock, plus a potful - not a handful, a full potful - of magic beans."

Beninati leaned back in his chair, hooked his thumbs under his Vineyard Vines suspenders and looked thoughtfully towards his window, or where a window would be if cubicles had windows. "You know, he drawled, "Jimmy and I turned out to be pretty much a pair of dumb f..ks when it came to real estate. I mean, other than the satisfaction of throwing all those old folks out of their apartments, our Byram condo deal really sucked. Our mansion plan was even worse and as for the redevelopment of Stamford, well...."

He leaned forward, an earnest scowl on his face. "We're not down though, Jimmy and me. We got plans, big plans. Our biggest problem has been figuring out where we can operate without someone smarter than us eating our lunch. And then, just last night, it came to me: we're going to get into collateralized debt obligations, big time. You watch, we're gonna take off like gangbusters. I absolutely guarantee it."

Our interview was terminated when movers arrived to repossess Beninati's desk but he's promised to call me, just as soon as his phone service is restored.

480 North Street
London Bridge is falling down
This place came on in July, 2006 asking $9.5 million. Today it was lowered to $5.495. I wasn't convinced that $9.5 was the right price two years ago but at its new price, perhaps we'll stop hearing about the lack of affordable housing in town.

Greenwich cops running low on ammo?
Great - they'll have less to bring to the High School next time a kid kicks a chair.

40 Sawmill Lane
We'll be seeing more of this
40 Sawmill sold for $6.0 million May 5, 2006. It came on the market this morning for $5.995.

John Cooke, Prudential, Sales Report
Courtesy of my friend John, here are some statistics to chew on:

Sell Lehman Brothers!

Oh, gee, Barney Frank as well?

Reform Fannie Mae at the expense of po'folks? Not if Barney Frank, champion of the poor, scourge of George W. Bush, had his way. According to Wikipedia

In 2003, the Bush Administration recommended what the NY Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." [5] This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank (D-MA) claimed of the thrifts "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing."[6]

[emphasis added]

Uh oh, Bush got to Dodd, too!

NYT, October, 1999 - Agreement Reached on Overhaul of U.S. Financial System

The breakthrough in today's legislation came in a backroom meeting at the Capitol soon after midnight, when a group of moderate Senate Democrats -- led by Christopher Dodd of Connecticut and Charles E. Schumer of New York -- forced a compromise between Mr. Gramm and the White House over the legislation's effect on the Community Reinvestment Act, a 1977 anti-discrimination law intended to encourage lending to minorities and others historically denied access to credit.

Mr. Dodd, whose state is home to the nation's largest insurance companies, and Mr. Schumer, with strong ties to Wall Street, have long sought legislation to repeal the Glass-Steagall Act. Both men said in interviews today that they moved to strike a compromise after it became apparent that the legislation might be killed, as it was last year by Mr. Gramm, over the debate about the Community Reinvestment Act.

...Mr. Gramm had maintained that he did not want anything in the bill that would expand the application of the Community Reinvestment Act because it was, he said, unnecessarily burdensome to banks. He had sought a provision that would exempt thousands of smaller banks from the law. He also wanted a provision that would expose what he has described as the ''extortion'' committed by community groups against banks by requiring the groups to disclose any special financial deals the groups extract from the banks.

But the White House found that provision unacceptable and had its own ideas about community lending. It wanted the legislation to prevent any bank with an unsatisfactory record of making loans to the disadvantaged from expanding into new areas, like insurance or securities.

The White House had insisted that the President would veto any legislation that would scale back minority-lending requirements.

The mortgage mess
Okay, this whole mortgage meltdown is obviously the deliberate work of that Ol' Debbil, George Bush and his puppet master, Dick Chaney, but this
article from the NYT in September, 1999 suggests that those two evil-doers were at work during the Clinton administration, pressuring Fannie Mae to expand "minority" home loans to 50% of Fannie Mae's portfolio. "Minority home loans" meant no income verification, no job necessary and drive-by appraisals. Bush, of course, knew that this was a guarantee of disaster but somehow he persuaded Monica Lewinsky to put a bug in Bill's ear and the rest, tragically, is history.
From the NYT's article:

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

...Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

Why shouldn't everyone pay income taxes?
From Professor Glenn Reynolds, of Instapundit

On a related note, I think we should rethink this business of having lots of Americans who don't pay income tax. As the Tax Foundation comments: "It is time for a serious public discussion of whether it is desirable to have so many Americans disconnected from the cost of government and what the consequences are of using the tax system as a vehicle for social policy."

Personally, I'd like to see everyone pay at least some income tax, and I'd like to see the amount of tax paid, by everyone, go up or down every year in tandem with federal spending. That would encourage fiscal discipline directly. It would also make it harder for politicians to promise everybody a free lunch, but hey -- why shouldn't they sacrifice something, too?

19 Farley Street
I like this house, a completely renovated 1900 farmhouse off lower Lake Avenue and within easy walking distance of downtown. $1.585 didn't move it but it's now down to $1.225, which doesn't seem crazy. I know the builder (no, he's not my client) and he does excellent work, so no cheap shortcuts here. I don't like the phrase "condo-alternative"; you're either in the market for a condo or you're not, but this is a reasonably-sized house for a reasonable price, in my opinion.

Orchard Place Condos
This was a fairly hot neighborhood a few years ago - despite the noise from I-95, it's within walking distance from the train and Bruce Park and condos were selling briskly. 71 Orchard Place, however, has been listed since May, 2007 and is still for sale, suggesting that this area's moment has paused, at least for now. Original price was $1.995 million, today it dropped to $1.595. Perhaps that will do it.

620 North Street, a new mansion, didn't sell at $6.390 million from April, 2008 until now. Today it has a new broker and a new price, $6.4 million. I wouldn't think this is the best time to raise a price, even if by only $10,000, but heck, what's to lose?

Harvard Graduates 1890
The Best and the Brightest?
The Wall Street Journal ran a scary story this Saturday on how close we came to a complete financial collapse last week. Of course, we may still see everything implode but, for now, the Paulson solution seems to have calmed the waters. I suppose we have no choice but to bail these people out, if you believe the WSJ article, and I do, but what sticks in my craw, and my wallet, is having to pay my money to save these jerks' hides. When they were prancing around town in their Bentleys crowing about how smart they were and how deserving of their financial windfall because they were so, so much smarter than us little people, Wall Street's wizards never offered to share their good fortune with the rest of us - at least, I never got a check. Now it turns out that they're complete morons, Harvard MBA degrees and all, and had no idea what they were so blithely buying and selling. Perhaps most galling, their leaders, guys like Dickie Fuld,and Merrill's John Thane, now admit that they were clueless about what the people under them were doing. But by God, they were chairmen of very important financial firms and that was worth a few hundred million, wasn't it?

Because of a loose (and now severed, thank goodness) family connection, I once followed the career of a particularly obnoxious Greenwich resident as he went from failure to failure, ruining one company after another and pocketing $10 million, $25 million, and so on in "please go away" money from each corporation he screwed up. With nothing to boast about boast he did, maintaining a mansion in town, flying all his favorites to Aspen for a millennium dinner that cost $1,000 a plate and in general, exuding an air of superiority that might have been intimidating if one didn't know what an incompetent buffoon he was. He's retired now, I believe - I can only hope he's soon joined by his younger peers.

Woe is us
The New York Times reports that 97% of all LIRR employees receive a 100% disability pension, courtesy of the federal government and an employer who couldn't care less about spending taxpayers' money. I don't like the idea of my money going to thieves, naturally, but what's more frightening is thinking about all the other scams just like this one going on around our country. This hoax, now exposed, might be addressed. Who's going to stop the rest of them?

Kaiser Wilhelm II
In memory of my uncle, Dr. Gerard Fountain
At a family dinner last night we got to reminiscing about our Uncle Gary who died in an accident last month at the age of 91. In addition to being a noted psychiatrist, Dean of Sarah Lawrence, professor at Dartmouth Medical School and an all-round terrific person, Gary was fond of telling what he called, "the only World War I joke you'll ever hear". We thought it a shame that such a recent joke (Gary first heard it on a Scarsdale playground in 1920 or so) should expire with our uncle so here it is again, ready for a new generation:
"Why did the Kaiser change his socks?
Because he could smell defeat."
When you stop laughing you can tell it to your grandchildren - after you explain who the Kaiser was.

Why Blog when readers can write this themselves?
Buried in the comments is this thoughtful essay from "Retired IB'r. I don't share his dark pessimism, but it's certainly a more accurate view of what's happening than you'll find in the latest NAR press release.

To look to recent times (last twenty or thirty years) as any indication as to how real estate will perform in the future is totally folly.

The author of the article you sited for example talks about how the Vancouver market did in the early '90's and extrapolates about today's recoveries.

The run-up’s in values in the last five to ten years dwarves any other period in our lifetime of experience by many orders of magnitude. Just look at the numbers.

This correction is not like anything anyone alive today has ever experienced. And all you have to do is look to the extraordinary moves by the Treasury and the Federal Reserve of last week to put the current situation in perspective.

Do not forget, our "leaders" told us six months or so ago that this was contained to subprime and it was a $50 billion problem. Now it is a trillion dollar problem and climbing six months later. I will not debate whether our "leaders" were stupid or duplicitous, but one or the other fits IMHO. Still, the rapid expansion of the problem demonstrates the mindboggling mess we find ourselves in. Add to this, the fact that Europe and the rest of the world has yet to see the problems in their banking systems as we are currently experiencing (and they will) tells me that this is a worldwide problem that has not nearly run its course.

The tremendous, unrelenting expansion of credit encouraged by the Greenspan Fed linked with a complete and utter failure of regulators and the total breakdown of underwriting standards by financial institutions is what created the worldwide credit bubble that we are witnessing exploding real-time today. To think this mess, which has real estate at its epicenter, will adjust in a mild manner and rebound quickly begs credulity.

Finally, the extraordinary events of the Treasury’s evolving bailout program appear (the details are still hidden in the mist) to not be designed to stop the fall of real estate prices, but instead an attempt to fix the broken intermediation of credit, which has come to a halt, through non-transparency of asset values. To not understand this, is to not understand the current financial meltdown. Whether Paulson, Bernanke et al succeed is still a big open question.

One day, we will find our way out of this wilderness, but it will take time, and the massive destruction of wealth (through the writing down of bad debts). The real estate markets will also have to correct to sustainable levels (without “easy credit” to support them), and only then will real estate appreciate again.

Retired IB’er

The sun's still shining for at least one person in Canada
The author is probably a real estate agent but makes some good points for those people who, like me, don't believe the sky has fallen permanently. Try it, if you wish - article is here.

Where do you live now that you've been fired by Lehman?
The answer, courtesy of reader "Jess", is Dick Fuld's place on North Street. Don't worry, if you and a few dozen other ex-Lehman folks start crowding him out, he can always move into his other homes.

Fuld's house

NOT Mr. and Mrs. Dickie Fuld, but a fun photo

Rentals
A reader asks,

How are 'The Rentals' over $5,000.00 per month - moving in the Old Greenwich - Riverside Area - is the 'Rental Market' slow too??
Is it a plus to rent the house along with all the furniture - yes - fully furnished?

I don't know much about the rental market but I hear that it has slowed and that prices have been falling for several years now - the latter may change if buyers want to wait and see what happens to the single family market.
In the past six months, 64 single family homes in Old Greenwich and Riverside rented for $5,000 or more (or at least asked $5,000 or more - some actually rented for less than that) and there are currently 29 houses actively for rent. I would think, but do not know, that the market will slow down now that September 1 has passed.
Furnished or unfurnished? Definitely unfurnished. Most houses are rented that way and most tenants already have their own furniture. A temporary tenant, one waiting for his own house to be finished, say, may have his furniture in storage and might welcome the opportunity to leave it there but, as a rule, I think unfurnished homes rent faster and more easily.

Blogger update
Cleared out all the temporary cookies and stuff from memory and Blogger now recognizes what day of the week it is. I may try this on my own head and hope for similar results.

Your house as an investment
One commentator on this blog points out that the house my grandmother bought for $15,000 in 1957 and which is now worth, I hope, $2.0 million, has returned "only" a 10% annualized return. With all respect, he misses the point - I've never argued that real estate, even Greenwich real estate, is the best place to stash your investment money, but assuming you need a place to live in and raise a family, this is a great town to achieve that goal.
My grandmother entertained 5 grandchildren in that house over the years, had a happy life there herself, got to watch and paint the goings on in the creek, hosted Katharine Hepburn for tea on the front porch (Hepburn, as a very young girl, considered my grandmother the movie star a role model - it was nice the two finally caught up with each other)and, all in all, got full value for her $15,000. When Nancy and I moved in we spent a small (huge to us) sum gutting and expanding the place and raised our own three children there. They could walk to school, ride bikes to their friends' houses, fight, swim and boat and in general, have a pretty nice childhood.
So if we end up selling the house for less than an index fund might have earned, so what? Vanguard certificates could never have produced any of the joys, sorrows and pleasures we've experienced in our house. and we didn't pay rent. I'd do the same thing again.

Fowl Play
Okay this is rude...
The victim attacked by the Tod's Point turkey Is still concerned. Looking at her picture, I wonder whether the turkey attacked because of feelings of inadequacy in the er, chest deprtment.

Slappy the Happy Clown
Three contracts this past week instead of 10 per day
Some of my peers will insist that I report this as a strong sign of a recovering market but the best I can say is that, for a fat girl, she sure doesn't sweat much.

Blogger.com still causing problems
Still having difficulties posting, the program doesn't recognize that it's now Saturday morning, won't save drafts, etc. It's nice of Google to provide this service but they're absolutely silent when they run into difficulties, don't suggest when they might correct anything and provide no way to contact them. I am in the process of switching to WordPress but until then, please bear with me.

Joe Biden on "altruism"
The other Vice Presidential candidate has strong thoughts on what it means to be a nice guy and give to the poor. One of my own readers considers paying more taxes to be "the neighborly thing to do" (query why he doesn't just go ahead and do it - would he like the IRS's address?). this fellow in Denver takes another view

When exactly did taxation transform into a form of charity? Biden, it seems, has a difficult time differentiating between coercion and generosity. The distinction is simple: When one fails at altruism, he is a louse; when one fails to pay taxes, he ends up in the slammer.

But anyone can "jump in" at any time. Biden and his wife, who would be considered wealthy under an Obama/Biden tax plan, for instance, gave an average of $369 a year to charity during the past decade. So you can see that by "help," Biden means assistance with your money.

Have you ever wondered when exactly taxation became a tool for mass redistribution of wealth?

"We want to take money and put it back in the pocket of middle-class people," Biden explained in an interview on "Good Morning America." The wealthy, last I heard, did not "take" or steal from the defenseless middle class; they, most often, earned their money. There is nothing to give back.

Moreover, the very premise of Biden's argument is a rickety mess. The rich already shell out their share. According to the Internal Revenue Service, the top 10 percent of households pay roughly 70 percent of all federal income taxes. The top 5 percent pay over 60 percent of all taxes. The top 1 percent? They pay nearly 40 percent of all income taxes. Sounds like an unfair share to me.

Myself, I like the moose hunter more every day.

(Friday September 19, 2008)
Time flies!
Another year has gone by and it's once again Talk like a Pirate Day!
AARRRGGGH!

Date and Time stamp not working
I blame it on Blogger.com, not me, because other bloggers are complaining. No word from the operator as to what's happening and why but I presume they'll fix it.

Greenwich Time reports that a wild turkey is threatening beachgoers. So far, the police have decided to let the poor bird stay where she is but spokesman, police Lt. Kraig Gray warns, "it's being more aggressive than it normally should and sooner or later something will end up happening."
Er, like Thanksgiving?

Let's hope it doesn't come to this
The New York Times reports on The Pain of Selling Short