Have you ever gotten drunk and thrown up? I didn't think you had. But I must confess it has happened to me a few times .
The first two times if happened I was a student at U.T. In my defense Playboy Magazine had voted U.T. Knoxville the number one party school in the nation, and I felt an obligation to uphold the schools reputation and traditions. I'm kind of responsible about things like that!
Two other times were on trips to New Orleans. I love the Big Easy; it's architecture, history, music, food and the spirit of "Laissez Le Bon Temps Roulet." Can I be forgiven if I got caught up in the spirit of the culture?
Then there were 2 or 3 times partying with friends. No excuses here. You are having a great time; your getting better looking and more humorous with every cocktail and then.... you are holding on to the bed while laying down. You make a serpentine path to the bathroom where you kneel at the alter of the porcelain bowl and well... you know the rest of the story.
Well during the 2nd term of the Bush Administration the banks threw down on a big party. Admit it... we all had a great time.
The public was getting dizzy on the soaring real estate values. Realtors got the big buzz selling large homes to customers that could not afford them. Mortgage bankers got knocked out loaded on commissions, and wall street traders just went crazy out of their minds selling junk AAA rated paper around the world. Unfortunately regulations peaked early and passed out in the corner oblivious to the party going on around them. And of coarse the banks that hosted the party were high on profits, bonuses, and stock dividends.
If you party too hard you are going to get sick and the banks were wasted. Some died, and some of the biggest and strongest were in the ICU on life support. Still in 2010 most are still looking puny. Banks take my advice and throw up the bad loans and foreclosed inventory. I promise it feels bad when it happens, but you will start improving immediately.
An article in "The Residential Specialist" http://www.crs.com/ "In The Shadow" concludes that banks have no incentive to unload their foreclosed inventory because of a recent change in federal accounting rules. This allows banks to hold foreclosed properties at valuations from 3 to 4 years ago. Losses are not taken until the sale of the foreclosed property takes place. There are also 7 million home owners behind on their mortgages. Bank held properties and bad mortagage loans that have not been dealt with have created a shadow inventory. This shadow inventory continues to increase supply and suppress prices and continues stalling a recovery in the real estate market.
It's time to deal with the back log of foreclosures and bad loans. Get them up, get them out. Then maybe we can then see values improving and return to a stable real estate market.
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