The State of the Union

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Voor degenen die dachten dat de economische gang van zaken in de USA
beter werd.
En alle aandacht gaat ondertussen uit naar PIIGS en Euro ;)

Zouden de financiele stofzuigers (GS e.d.) nog steeds op 35/40% van alle
winst in de USA zitten?

Groet / Cees

orlandosentinel.com/business/os-orlando-bankruptcies-set-record-20100519,0,5039538.story
Orlando area's consumer-bankruptcy rate soars to record
By Richard Burnett, Orlando Sentinel
7:03 PM EDT, May 19, 2010

Personal bankruptcies have roared back to record levels in Central
Florida, only a few years after Congress overhauled the nation's
bankruptcy law in an attempt to rein in the number of people declaring
themselves broke.

Fueled by the worst recession and highest unemployment in decades,
bankruptcies in the Orlando area last year exceeded the record set
earlier in the decade, before the new law made it tougher for people to
erase their debts.

And the region, suffering through one of the longest and deepest housing
slumps in the country, is on pace to set another record for bankruptcies
this year.

According to data compiled by U.S. Bankruptcy Court in Orlando,
bankruptcies in the region jumped to 20,305 last year, an increase of
nearly 60 percent compared with 2008. That total also broke the previous
record of 17,770 filings set in 2005, when cash-strapped consumers here
and across the country rushed to declare themselves insolvent before the
new, tougher bankruptcy law took effect that fall.

Orlando's bankruptcy caseload grew at a faster pace last year than
Tampa's (up 42 percent) or Jacksonville's (up 32 percent). All three
regions are part of the U.S. Bankruptcy Court for the Middle District of
Florida.

Nationally, almost 1.5 million debtors filed for bankruptcy last year, a
32 percent increase from 2008. But last year's nationwide total was
still almost 30 percent shy of its 2005 record of nearly 2.1 million,
according to data compiled by the American Bankruptcy Institute and
National Bankruptcy Research Center.

So far this year in Central Florida, more than 7,700 cases have been
filed in Orlando's bankruptcy court, records there show. That total, as
of April 30, was running 26 percent ahead of last year's record-setting
pace.

Almost 97 percent of the region's bankruptcies these days are filed by
individuals, rather than businesses, as the sour economy continues to
wear on local households.

Lynn Jones (who asked that her first name not be used) said she and her
husband filed personal bankruptcy in 2009 as a last resort after
absorbing a series of financial blows, including the loss of his
construction job.

It fell to Jones, a health-care manager living in Seminole County, to
support the family household, which includes her 77-year-old mother, the
couple's grown daughter (who moved back in after losing her job) and a
granddaughter. Jones took on two side jobs to make more money, but it
still wasn't enough.

"I was able to hold it together for a while, but I had to worry about
how long it would take before everyone got back on their feet," Jones
said, "and how long could I last without doing something [like
bankruptcy] that would help our finances."

Jones' story is a familiar one these days, according to Lori Patton, the
Orlando bankruptcy lawyer who represented her. Extended-family
households are one of the main causes of personal bankruptcy these days,
she said, along with joblessness and housing woes.

"We have a lot of multigenerational households now: parents whose
children and grandchildren have moved back because of one issue or the
other," she said. "The parents may have been doing OK by themselves, but
with more mouths to feed, they're just in over their heads."

Nationwide, bankruptcies in the first quarter rose 17.5 percent from the
same period last year to 388,148. In March alone, nearly 149,270 cases
were filed — the largest monthly tally since the 2005 bankruptcy-reform
law took effect.

"The sustained economic pressures of unemployment, coupled with high
pre-existing debt burdens, are a formula for consumer filings to surpass
1.5 million" this year, Sam J. Gerdano, executive director of the
American Bankruptcy Institute, said in a written statement.

In some cases, the "pre-existing debt" load can be huge, especially for
small-business owners struggling to stay afloat, said Jackie Royal, a
paralegal and case assistant with the Lake Mary law firm of Jonathan B.
Alper.

Royals said a client who owned restaurants in Volusia County had fought
to save them by charging business-related expenses on his personal
credit cards. By the time he filed for bankruptcy, he had amassed $1
million in unsecured debt, including $750,000 in credit-card balances.

"That's obviously pretty extreme," Royal said, "but we have had a lot of
people like that who own their own business who have come to us with
some pretty big personal debt."

Patton said many individuals trying to fend off insolvency wipe out
their savings, withdraw retirement funds and max out their credit cards
in hopes they can turn things around. Too often those people end up in
worse shape than if they had taken action earlier, she said.

Jones and her husband filed a Chapter 13 bankruptcy, which enabled them
to restructure their personal debt and their delinquent mortgage so that
they matched their current income.

That made it worth dealing with the stigma of a bankruptcy filing and
the knowledge their credit will be damaged for years, Jones said.

"I figured that, yes, it'll affect our credit for a while, but so what?
We will be hanging on to our house and having a roof over my family's
head," she said. "It's also relieved the stress of all the harassing
calls that come with being in debt. I feel much more stable now
financially. We're getting better at managing our budget. Things are
getting better."


pervleft at 11:01 PM May 19, 2010

Have you noticed there is almost no building in central fl?

That means people who sell appliances, carpets, hardware and boards,
schrubs, people who were in construction, and on and on, the title
companies, people who insure, and especially the local governments who
tax all these activities are now broke.

Those people will not go to the stores to buy clothes, or get clothes
cleaned, or go to restaurants, and on and on.

Somebody is going to have to support local governments, and that someone
is the ones left, not bankrupt.  They will pay more.  A rising economy
floats all boats.

And, from what I have read and seen, we are years from recovery, if we
ever do.  I recommend, save.  But, when you save, people selling go out
of business.  Bankruptcy breeds bankruptcy.  Ah, well, the next several
generations will pay this off, maybe.
Relativist at 10:55 PM May 19, 2010

At least Orlando is good in something----bankruptcies!!!  YES!!!!  On
the way to #1 baby!!!!!!
pervleft at 10:54 PM May 19, 2010

It fell to Jones, a health-care manager living in Seminole County, to
support the family household, which includes her 77-year-old mother, the
couple's grown daughter (who moved back in after losing her job) and a
granddaughter. Jones took on two side jobs to make more money, but it
still wasn't enough.

No, many idiots in fl borrowed on their houses and bought a lexus, huge
flat screen tv, had their house rebuilt, bought a boat, etc.    Some,
took their savings and bought options to buy condos, like in miami and
orlando.

then, the fit hit the shan.

But, let us not typecast all as scammers.  As i drive around orlando I
see about 1/3 OF ALL RESTAURANTS boarded up.

The owners went bankrupt, the workers had jobs and car debts and
mortgages, and credit card debts.

You cannot have 1/3 of businesses like circuit city go out of business
and say everyone was a scammer.  Most of these people are just people
who probably should have saved more, and not gotten in the American
dream of buying.  Now, we all pay.
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orlandosentinel.com/business/os-kassab-mortgage-morality-05192010-20100519,0,4364292.column
OrlandoSentinel.com
Is it wrong to walk away from a mortgage you can still pay?

Beth Kassab

Business Columnist

May 19, 2010

More people are walking away from their homes not because they can't
make the mortgage payments, but because they no longer want to.

They decide it's not in their best financial interest to write checks
for a home when they owe far more than it's worth.

But is it the moral thing to do?

Increasing numbers of so-called strategic defaults suggest more people
are unshackling themselves from the old-fashioned shame of losing their
home to the bank.

In Orlando, which leads Florida and most of the country in underwater
homeowners with 55 percent owing more than their home's value, that
growing mentality has the potential to do serious damage to the market.

Choosing foreclosure means, at the very least, damaged credit for you
and piling on to the rubble left by the busted real-estate bubble for
everyone else.

But since when in a capitalist society do we expect people to fulfill a
contract based on the ramifications for the greater good rather than
their own self interest?

Brent White, a law professor at the University of Arizona, says risks to
the market and the notion that another foreclosure will contribute to a
neighborhood's falling prices should not override a homeowner's own
financial picture.

"It's simply wrong, in my opinion, to ask underwater homeowners to
accept their own financial ruin for the common good, especially when the
housing collapse was caused primarily by the mortgage industry and the
government's failed policies," he said.

White argues that a mortgage "is purely a legal document, not a sacred
promise" and likens strategic default to paying a penalty to terminate a
cell-phone contract if you find a better deal with another provider.

It's true that the big banks are the first to cut their losses and stop
paying on a bad investment when it suits them, and it's hypocritical for
them to expect homeowners to do any different.

Yet the consequences of erasing the moral dilemma associated with these
tactical foreclosures cannot be underestimated.

As more people choose that route, the rest of us will feel the impact.
Mortgages will be more expensive in the future because of the increased
risk for lenders. Housing prices will stay lower. And a full economic
recovery will take longer to achieve.

You might as well say that when a theater is burning down, it's rational
to trample other people in rushing to the exits, says Luigi Zingales, an
economist at the University of Chicago.

"People have an incentive to rush to a door in the theater," he said.
"But if they slowly walk out of the building, they allow many more
people to get out."

Certainly there is compassion for people who bought homes at the peak of
the market and now can no longer make payments because of prolonged
unemployment or other hardships. And it's important to note that housing
prices have typically appreciated over time, leading many buyers to
believe they were making a safe bet.

It's harder to stomach the decisions by people who rode the market
highs, squeezing every bit of equity out of their homes in the form of
loans for vacations or cars. And now, post-crash, they want to quit
paying those loans — even when they could afford to do so — because it
could take a decade or more to regain their equity.

When you play the market, whether in stocks or housing, you accept some
risk and take the losses with the wins.

Whether they feel any inkling of remorse — and many still do — more
people are figuring the solution to their own financial calculus is to
deliberately stop making their mortgage payments.

It's clear that the banks and the government need to change their
policies to end this dangerous trend. In Friday's column, I'll look at
the solutions proposed by those who believe strategic defaults are
immoral and those who don't and why the ideas haven't gained any traction.

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