Design pays

Or A Tale of Two Houses

Here’s an example of poor design not paying and following that, an example of good design paying off.

The projects are in many ways opposites of each other: one is large (over sized, really at five bedrooms, four bathrooms) and the other is small (just one bedroom, one bath), one is cheaply built, the other has been built to last a long time. One is built in the suburbs, another built in the city. One is built to a certain standard and would look the same in Seattle or in Florida, the other is connected to its community is very particularized to its environment. One is an energy hog and one is sustainable. One is (probably) not designed by an Architect, the other is designed by a very capable one. Those sets of factors are connected.

Moral of the story: Hire an Architect! [In the interests of full disclosure, I’ll note that–yes, you guessed it–I am an Architect!]

Continue reading “Design pays”

Design pays

Bad Debt, Good Property

Two stories, confirming the unsustainability of the debt based economic shell game that the globalized banking sector has been advancing the past several years. They both involve about the same amount of money, 15 or 16 billion USD. There are two problems: one is the bank’s wet dream of a massive pile of debt running headlong into the realities of democratic institutions, where the debt is just canceled, en masse:

India cancels small farmers’ debt

The Indian government is to cancel the entire debt of the country’s small farmers in a giant scheme that will cost 600bn rupees ($15bn; £7.6bn).
The move is a centrepiece of India’s latest budget, with the government also increasing education spending by 20% and health funding by 15%.

Of course, debt canceled gets paid by someone, in this case the Indian Govt, but let’s see how long their commitment lasts… And the other problem is the mounting fallout from the sub-prime mess, first reported here in April of last year:

HSBC ‘to unveil $16bn writedown’

The UK’s largest bank HSBC is expected to unveil about $16bn (£8.1bn) of losses for 2007, but will still make an annual profit, reports suggest.

The firm’s annual results out on Monday will show that the bad debt charge is mostly related to the crumbling US housing market and consumer blues.

Reminds me of the famous line: “When you owe the bank ten thousand dollars, you have a problem, when you owe the bank ten million dollars, the bank has a problem…” Recall Hillary’s promise of a moratorium on repossessions, and that’s just the tip of the populist iceberg. Bottom line: that debt is all about to collapse. See this great post from the blog Sudden Debt:

The People’s Bank of the USA

As the credit crisis expands like ripples in a pond, politicians are waking up to the fact that they “must do something”. Homeowners upside-down on their mortgages (i.e. they owe more than their homes are worth) are their current focus. The New York Times reports that as many as 8.8 million homeowners may be under water. As I have said in previous posts, the chief driver of mortgage defaults is exactly such a condition, leading to “jingle mail”.

Panicked bankers are now all over Washington suggesting (“imploring” describes it better) that the federal government should buy and guarantee their risky mortgages, effectively turning Uncle Sam into the Peoples’ Bank of The United States.

Don’t you just love it? When times are good, bankers are all for invisible hands, laissez faire and Friedmanite free markets; but let Mr. Market give them a bit of the stick and they turn bolshier than Rosa and Leon (that’s Luxembourg and Trotsky, for those less versed in communist hagiography).

Bad Debt, Good Property

The Unsecured Country (rule of law edition)

It seems that the sub-prime mess will have even more fallout than I’d thought back in this post in April. I’d thought about the global connections but there are a few things happening that could make this a really sticky wicket, and the fallout could well be much larger than anyone’s allowing right now.

It has come out that one of the largest mortgage lenders had pressured the appraisal firm to use appraisers who had a track record of over-valuing houses. The next logical step is an accusation of fraud from those who securitised these mortgages, and then from those who bought the securities backed by these mortgages. It is a small step from that point for consumers to begin to repudiate these loans, saying they were fraudulently duped into taking out a larger loan, and therefore seek damages. And they would simply be: right, if the lender put pressure on the appraiser. And it seems they did.

And from a recent legal decision regarding the enforceability of these securitized loans, there is a special bonus, one of those great quotes from a judge who actually upholds the law, and didn’t get (or didn’t read) the memo that the American legal system is a wholly-owned subsidiary of Mega Corp, Inc:

The plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.

Continue reading “The Unsecured Country (rule of law edition)”

The Unsecured Country (rule of law edition)

The Unsecured Country

Well an interesting development. Seems there is some instability in the Commercial Real Estate Bond market. Recall that just before the near collapse of the residential sub-prime market there was a similar, although slightly less drastic, “correction.” This time, about the past 5 or six years worth of income was wiped out, and we will see if there’s a mad rush out of these vehicles, and if so, some of the commercial real estate lenders get squeezed. Something certainly to watch.

Continue reading “The Unsecured Country”

The Unsecured Country