Reply #8: Back in the day, Jimmy Carter had a buddy

[truedelphi]

Vance, Lance?? Anyway the man was under investigation. I forget his name, but my boss would listen to the radio and pay attention to the hearings.

According to those hearings, banks could lend up to 95% of their monies out to THEMSELVES!!

And since there isn't much oversight, I imagine the remaining 5% could be lent out to the Bank President's brother-in-law or some such other confederate.

And of course over the years, 5% has become a down payment - so you cansee that the bankers can have lots of property - probably not in the guise of individual homes, but things like shopping malls etc. They might create a "shell" company with a different name for each enterprise.

For a while, the real estate economy was working. And don't forget, there was a real element to it as well as the Ponzi scheme element.

If I buy a house to flip but the bathroom needs upgrading and you are good at laying tile, well, you have yourself a job. One that may pay well to boot.

Of course, once the Ponzi scheme goes awry, you may be out of work. And as a house flipper, I am suddenly stuck with a house that I may not be able to sell, and that will now need to be paid for with the equity on my other homes. (Can I point out that this is the "hypothetical" I. And not the real me.)

I live in an area where even today, San Francisco Bay area millionaires are building second and third resort location homes.

So a lot of the better construction people still have jobs.

But in the last month, the friendly neighborhood grocery posted a sign: "No loans. Cash, checks or ATM only. Absolutely NO loans."

There was something ominous about it. That and the fact that the "Sticker " price on the tract homes near my house have steadily deflating prices on the handout sheets for the Buyer.