Fannie, Freddie & The nightmare on Wall Street
KNOW Fannie Mae and Freddie Mac?
18 August 2008
KNOW Fannie Mae and Freddie Mac?
You should, because these US mortgage giants have created a US$5.3 trillion ($7.5 trillion - gasp!) financial black hole that the whole world has been dragged into.
What happened here? And who should we blame?
Hold your horses, dudes. Bring me the popcorn and soda first. And I will tell you a story about a feel-good, black-and-white Hollywood movie made back in 1946, back when life was simpler.
Movie Hero
In It's A Wonderful Life, all-American hero George Bailey (played by James Stewart) saves his building and loan association from a run by using the money from his own wedding dowry - all US$2,000 of it - to supply cash to his panicked depositors.
Young GB tells the town's people that things aren't as gloomy as they appear. He tells depositors that 'we're all in this together' - that their money is tied up (stuck, lah) in their neighbours' houses... as an investment.
Though jittery, the townsfolk trust in young GB's honesty and agree to withdraw only what they need to last the week.
At the end of the day, when the financial house closes its doors, it is spared from going bust - all because of a balance of US$2.
Young GB is your model investor - he saves, he reinvests dividends.
He takes the long view while others around him mock him and snap up short-term gains. He sticks to his core values, though at times he feels shortchanged.
Fast forward some 60 years later and the sub-prime crisis, initially unnoticed, in the US in 2006, morphed into a full-blown, headline-splashing global panic by July last year.
Rising interest rates, which increased the monthly payments on newly popular adjustable rate mortgages, left many American homeowners unable to service their loans.
However, something uniquely American was on their side.
The home loans were on a 'no recourse' basis - that is, a borrower could easily 'walk away' and nothing else would happen to him, other than the lender seizing his house and reporting the default to a credit agency.
And, guess what?
Many Americans did just that - especially those with the so-called sub-prime loans. They walked away without sparing any thought for their lenders.
Meanwhile, property values, which suffered from the bursting of the US housing bubble, left the by-now-desperate American banks without a ready means to recoup their losses.
This, in turn, led to declines in stock markets worldwide, several hedge funds becoming worthless and, not surprisingly, it also led to the bankruptcy of several mortgage lenders.
Barely a year later, just last month, I witnessed 'live' on CNN another GB making a shock announcement.
Not our young George Bailey, but our not-so-young US President George Bush.
Taxpayer's Money
Old GB talks about the health of Fannie Mae and Freddie Mac and, get this right, the huge repercussions which would occur in the banking and mortgage industry if either one fails.
His stop-gap solution: Truckloads of US taxpayer's money for both Fannie and Freddie. Much more than the US$2,000 that young GB put up.
Uncle Sam's share of the bill is now estimated at US$300 billion, based on the Housing and Economic Recovery Act of 2008 that old GB signed into law on 30Jul.
How deep is this US cesspool?
At this point, the truth be told, no one really knows for sure.
But the direct result of this financial uncertainty has been a traumatic collapse in trust.
This is worrisome since the sole foundation of today's banking is trust.
So what's next, doc?
Some analysts say a US government bailout for Fannie and Freddie is unlikely and that, in any event, it shouldn't be hurried.
They say there's still time for Fannie and Freddie to raise more money from the capital markets, but with some kind of government backing. Others say the time to act is now, before things get worse.
I say, let's replay It's A Wonderful Life - to understand the real truth, to learn the real lessons. Let's also remember young GB. Let's restore trust first. The rest will follow.
--------------------------------------------------------------------------------
Our new columnist
HE calls himself a Boston Brahmin.
And he aims to figure out the big numbers in the news for busy readers.
Harvard-trained economist Zhen Ming is a branding consultant who will bring to The New Paper more than 25 years of cross-border business, banking and broadcasting experience.
He co-founded the TV show Money Mind on Channel NewsAsia.
While with a local Big Three bank, he dealt with offshore syndicated loans in the region.
He is a member of the American Management Association's Pan Asian Council, a life member of the Economic Society of Singapore and a former Honorary Secretary of the Harvard Club of Singapore.
He also co-founded Business Angel Network (South East Asia) Ltd, a not-for-profit organisation.
Monday, August 18, 2008
Wiped out once, he now drives a Maserati
A MAN'S TALE OF BRICKS-AND-MORTAR SUCCESS
Wiped out once, he now drives a Maserati
THIS is an against-the-odds tale to perk up your personal meter to measure happiness.
By Elysa Chen
18 August 2008
THIS is an against-the-odds tale to perk up your personal meter to measure happiness.
Be happy for Mr David Cheang, youngest senior vice-president in the HSR Property Group.
He was once down but, perhaps like you, he never gives up.
Mr Cheang was just 21 years old when his family was hit by the Asian financial crisis, in 1997.
They lost their semi-detached house and had to move to an HDB flat in the nearby Pasir Ris estate.
His father, who was running an electronics business then, also suffered strokes four times during that tumultuous period.
Yet, after eight years of real estate work, Mr Cheang has got it all back.
He moved into a new semi-detached house a week ago. It has exactly the same layout as his father's old house.
Parents lost everything
He said: 'My parents lost everything overnight. But I have got back what they lost.'
Last week, he not only moved into his $2.8m house, he also bought a new Maserati Quatroporte, worth a cool $400,000.
He said: 'When I drove my car into my house, it was the exact same feeling I had when I was driving my father's Mercedes Benz into our old house. That feeling is indescribable.'
Besides the extravagance of his house and his car, there is something else that the two have in common: the number five.
Mr Cheang placed a special bid for a car plate with the number five on it, and his house number also contains that digit.
This is because of a promise he made his mother-in-law two years ago.
He said: 'I told her, 'Give me two years, and I will wu bo (have wife) wu chia (have car), wu lui (have money), wu chu (have house), wu kia (have child).' And it really came true. This house by the beach and family is a dream come true for me.'
Wu, in Hokkien, means 'to have', but has the same pronunciation as 'five' in Mandarin.
His message for others with similar aspirations is to never lose heart.
He recalls his own tough times during the first three years of his career when he was clocking 18-hour days at work just cold-calling potential clients and even distributing his namecards to strangers in the lift.
Money comes, money goes
More than once, he even had to play marriage counsellor to his clients when they got divorced, and approached him to help them sell their houses.
Although he was closing deals, in the first 3 1/2 years of working, most of his pay went to paying off the 'millions of dollars' that his parents owed the bank and their creditors.
Mr Cheang said: 'I would be earning money, but I never saw the money! It seemed as though the bills and debts to pay were never-ending.
'I would try to save for a rainy day, but the rainy days kept coming, and I always needed a big umbrella again. It was always a big heartache whenever I had to take out money from the bank.'
In 2000, he got his first big break when he got the exclusive opportunity to sell a house that his fellow agents said was 'impossible to sell' because of the direction it was facing.
But within two months, he sold the house, and managed to earn a commission of $13,250.
In his first year as a full-time associate agent, he was already winning awards for being the top producer, closing as many as six deals a day during the seventh month period.
Today, Mr Cheang still works 15 hours a day.
But he never forgets the days when he was down. That's why a portion of his income goes to the charities now.
--------------------------------------------------------------------------------
Copyright © 2005 Singapore Press Holdings Ltd. Co. Regn. No. 198402868E. All rights reserved.
Privacy Statement and Conditions of Access
Wiped out once, he now drives a Maserati
THIS is an against-the-odds tale to perk up your personal meter to measure happiness.
By Elysa Chen
18 August 2008
THIS is an against-the-odds tale to perk up your personal meter to measure happiness.
Be happy for Mr David Cheang, youngest senior vice-president in the HSR Property Group.
He was once down but, perhaps like you, he never gives up.
Mr Cheang was just 21 years old when his family was hit by the Asian financial crisis, in 1997.
They lost their semi-detached house and had to move to an HDB flat in the nearby Pasir Ris estate.
His father, who was running an electronics business then, also suffered strokes four times during that tumultuous period.
Yet, after eight years of real estate work, Mr Cheang has got it all back.
He moved into a new semi-detached house a week ago. It has exactly the same layout as his father's old house.
Parents lost everything
He said: 'My parents lost everything overnight. But I have got back what they lost.'
Last week, he not only moved into his $2.8m house, he also bought a new Maserati Quatroporte, worth a cool $400,000.
He said: 'When I drove my car into my house, it was the exact same feeling I had when I was driving my father's Mercedes Benz into our old house. That feeling is indescribable.'
Besides the extravagance of his house and his car, there is something else that the two have in common: the number five.
Mr Cheang placed a special bid for a car plate with the number five on it, and his house number also contains that digit.
This is because of a promise he made his mother-in-law two years ago.
He said: 'I told her, 'Give me two years, and I will wu bo (have wife) wu chia (have car), wu lui (have money), wu chu (have house), wu kia (have child).' And it really came true. This house by the beach and family is a dream come true for me.'
Wu, in Hokkien, means 'to have', but has the same pronunciation as 'five' in Mandarin.
His message for others with similar aspirations is to never lose heart.
He recalls his own tough times during the first three years of his career when he was clocking 18-hour days at work just cold-calling potential clients and even distributing his namecards to strangers in the lift.
Money comes, money goes
More than once, he even had to play marriage counsellor to his clients when they got divorced, and approached him to help them sell their houses.
Although he was closing deals, in the first 3 1/2 years of working, most of his pay went to paying off the 'millions of dollars' that his parents owed the bank and their creditors.
Mr Cheang said: 'I would be earning money, but I never saw the money! It seemed as though the bills and debts to pay were never-ending.
'I would try to save for a rainy day, but the rainy days kept coming, and I always needed a big umbrella again. It was always a big heartache whenever I had to take out money from the bank.'
In 2000, he got his first big break when he got the exclusive opportunity to sell a house that his fellow agents said was 'impossible to sell' because of the direction it was facing.
But within two months, he sold the house, and managed to earn a commission of $13,250.
In his first year as a full-time associate agent, he was already winning awards for being the top producer, closing as many as six deals a day during the seventh month period.
Today, Mr Cheang still works 15 hours a day.
But he never forgets the days when he was down. That's why a portion of his income goes to the charities now.
--------------------------------------------------------------------------------
Copyright © 2005 Singapore Press Holdings Ltd. Co. Regn. No. 198402868E. All rights reserved.
Privacy Statement and Conditions of Access
Sunday, August 17, 2008
Mah Bow Tan says home upgrading works will be affordable for all
Mah Bow Tan says home upgrading works will be affordable for all
By Hoe Yeen Nie, Channel NewsAsia | Posted: 16 August 2008 2215 hrs
SINGAPORE : National Development Minister Mah Bow Tan has given the assurance that no household will be left out of the benefits of basic home improvement works.
Mr Mah, who is also MP for Tampines GRC, was speaking at the launch of an upgrading project at a Tampines precinct.
Under the scheme - known as the Home Improvement Programme - introduced last year, basic repairs are fully funded by the government, while residents pay for other non-essential works.
And although rising costs have been a concern for many, Mr Mah said the bill will remain affordable for all. And the Housing and Development Board has schemes in place to provide low-income residents with financial assistance. - CNA/ms
By Hoe Yeen Nie, Channel NewsAsia | Posted: 16 August 2008 2215 hrs
SINGAPORE : National Development Minister Mah Bow Tan has given the assurance that no household will be left out of the benefits of basic home improvement works.
Mr Mah, who is also MP for Tampines GRC, was speaking at the launch of an upgrading project at a Tampines precinct.
Under the scheme - known as the Home Improvement Programme - introduced last year, basic repairs are fully funded by the government, while residents pay for other non-essential works.
And although rising costs have been a concern for many, Mr Mah said the bill will remain affordable for all. And the Housing and Development Board has schemes in place to provide low-income residents with financial assistance. - CNA/ms
Farrer Park Mediplex to be ready by 2010
Farrer Park Mediplex to be ready by 2010
By Hoe Yeen Nie, Channel NewsAsia | Posted: 16 August 2008 1957 hrs
SINGAPORE : A medical complex - comprising a hospital, specialist suites and a hotel - will be built in Singapore by October 2010.
Its aim is to grab a chunk of the burgeoning multi-billion dollar market for medical travel in Asia.
The 19-storey Farrer Park Mediplex will comprise a hospital, specialist suites and a hotel.
It is believed the first of its kind in Asia, and the company behind it expects to be a strong contender in the market for medical travellers - with about half of its patients coming from overseas.
Dr Djeng Shih Kien, chairman, Singapore HealthPartners, said: "(These will include) patients who are on dialysis. They can stay in the hotel, have their dialysis, and use Singapore as a base and travel to the surrounding nations."
Singapore HealthPartners hopes to attract some 400 specialists covering a range of fields.
But ultimately, it wants to establish a reputation in cardiology and oncology - boosted by state-of-the-art facilities.
It believes it is also satisfying a growing need of doctors for more space.
Dr Djeng explained: "There is a huge demand for medical space. There are so many doctors who cannot get a medical suite to practice. If you look at (the situation) now, all the medical suites at (rival group) Parkway, there are three or four doctors sharing one suite. So there's definitely a need for a new hospital, new suites, just to make us catch up with neighbouring countries."
The nearby Farrer Park and Little India train stations will take patients into the city centre within five minutes.
The entire complex is expected to cost about S$350 million, and given rising construction costs, Singapore HealthPartners said it is prepared to pay about 10 to 15 per cent more, just to get the project completed on time.
Medical tourism in Asia is worth an estimated S$106 billion, and many say the pie is big enough for all.
And with its integrated facilities, Singapore HealthPartners is confident it has got the edge over other private healthcare providers in the region. - CNA/ms
By Hoe Yeen Nie, Channel NewsAsia | Posted: 16 August 2008 1957 hrs
SINGAPORE : A medical complex - comprising a hospital, specialist suites and a hotel - will be built in Singapore by October 2010.
Its aim is to grab a chunk of the burgeoning multi-billion dollar market for medical travel in Asia.
The 19-storey Farrer Park Mediplex will comprise a hospital, specialist suites and a hotel.
It is believed the first of its kind in Asia, and the company behind it expects to be a strong contender in the market for medical travellers - with about half of its patients coming from overseas.
Dr Djeng Shih Kien, chairman, Singapore HealthPartners, said: "(These will include) patients who are on dialysis. They can stay in the hotel, have their dialysis, and use Singapore as a base and travel to the surrounding nations."
Singapore HealthPartners hopes to attract some 400 specialists covering a range of fields.
But ultimately, it wants to establish a reputation in cardiology and oncology - boosted by state-of-the-art facilities.
It believes it is also satisfying a growing need of doctors for more space.
Dr Djeng explained: "There is a huge demand for medical space. There are so many doctors who cannot get a medical suite to practice. If you look at (the situation) now, all the medical suites at (rival group) Parkway, there are three or four doctors sharing one suite. So there's definitely a need for a new hospital, new suites, just to make us catch up with neighbouring countries."
The nearby Farrer Park and Little India train stations will take patients into the city centre within five minutes.
The entire complex is expected to cost about S$350 million, and given rising construction costs, Singapore HealthPartners said it is prepared to pay about 10 to 15 per cent more, just to get the project completed on time.
Medical tourism in Asia is worth an estimated S$106 billion, and many say the pie is big enough for all.
And with its integrated facilities, Singapore HealthPartners is confident it has got the edge over other private healthcare providers in the region. - CNA/ms
Hue and cry over Tiong Bahru paint job
Aug 17, 2008
Hue and cry over Tiong Bahru paint job
Some residents find the proposed colour schemes for estate's art deco flats too garish or cartoonish
By Hong Xinyi
Pink, purple and blue are colours that have made some people see red instead.
A proposed paint job for Tiong Bahru estate's iconic art deco flats has upset some residents, some of whom feel the area will look too loud or cartoonish.
On Aug 8, the Tanjong Pagar Town Council had sent out survey forms to residents of the 57 pre-war and post-war apartment blocks. It sought their vote for an upcoming repainting job.
Among the options: brighter colours like pink, purple and blue in place of the current cream and beige shades of the past decade.
Residents have to send in their votes by tomorrow and the council expects work to begin next month.
Mr Andrew Loh of LG Architects & Associates was hired by the council to come up with several colour schemes. Members of the residents committee then narrowed these down to eight schemes: four for the pre-war and four for the post-war buildings.
All was well, until the survey forms were sent out.
One resident, advertising executive Eugene Yip, 37, who moved there four years ago, said the proposed colours will make the area look 'very cartoonish and kiddy, like a Disneyland'.
'It's good to give the buildings fresh paint, but these colours won't enhance the ambience of Tiong Bahru,' he said. 'I prefer softer colours.'
He and other residents have written to the town council asking for better options. Several spoke of the buildings' legacy.
Accountant Edwin Leow, 38, who moved into the neighbourhood last year, said: 'A place that evokes memories of the past doesn't need such loud colours.'
Fellow resident Terence Yeung, 36, an installation artist, agreed. 'The colours proposed show a poor understanding of conservation. We will lose the authenticity of this area's charm and art deco architectural heritage.'
Built by the then Singapore Improvement Trust in the 1930s, the pre-war buildings formed the first public housing estate in Singapore.
The area, bounded by Seng Poh Road, Outram Road and Tiong Poh Road, was given conservation status in 2003.
An Urban Redevelopment Authority (URA) spokesman told The Sunday Times that owners of conserved buildings do not need to consult the URA when repainting is carried out as part of regular maintenance work.
'The exceptions are certain landmarks and categories of buildings where a specific colour scheme is part of the conservation building's architectural value.'
Examples include black and white bungalows and buildings of stone, brick tile and Shanghai Plaster finish, which are all required to keep their original appearance.
Said the spokesman: 'URA has generally given the owners of conservation buildings greater flexibility in the choice of colour because it does not affect the building structure and is easily reversible. However, we do encourage owners to use colours that would enhance the architectural qualities of their heritage buildings.'
Over the past five years, these conserved Tiong Bahru flats have attracted growing numbers of young professionals, including many from the creative industries.
Property agent Alvin Yeo, 37, who lives in one of these flats, estimates that these buyers make up about 20 per cent of the thousand or so households in his neighbourhood.
He felt going ahead with the colour schemes will affect property prices there.
A 1,000 sq ft apartment here currently costs about $550,000 to $600,000, said Mr Yeo, who estimated that garishly coloured facades may dent these prices by around 10 per cent.
'The kinds of people interested in living in these buildings in recent years resist HDB blocks because they find them boring and they want something different,' he said.
'The potential buyers from this niche group will probably just shift their interest to areas like Balestier or Joo Chiat, which still retain their character.'
But not all residents objected to the proposed colours.
Housewife Patricia Yong, 36, who has been living in the estate for 10 years, liked the pale purple option. 'It's more feminine, and it's good to give the place a bit more colour.'
Retiree Michael Tan, 57, who has been living there since 1951, also liked the suggested colours. 'It will make the place look brighter.'
Mr Loy Sai Sai, 56, the senior property manager for Tanjong Pagar Town Council, has been in charge of this estate since 1991.
He said that Mr Loh was briefed on the architectural significance of the estate.
'Colours are very subjective. We just wanted to let the residents have a chance to participate in this process of giving the whole estate a better living environment.
'We are open to suggestions. We will look at the feedback, and if a majority of residents are not in favour of the proposed colours, we will make changes.'
hxinyi@sph.com.sg
Hue and cry over Tiong Bahru paint job
Some residents find the proposed colour schemes for estate's art deco flats too garish or cartoonish
By Hong Xinyi
Pink, purple and blue are colours that have made some people see red instead.
A proposed paint job for Tiong Bahru estate's iconic art deco flats has upset some residents, some of whom feel the area will look too loud or cartoonish.
On Aug 8, the Tanjong Pagar Town Council had sent out survey forms to residents of the 57 pre-war and post-war apartment blocks. It sought their vote for an upcoming repainting job.
Among the options: brighter colours like pink, purple and blue in place of the current cream and beige shades of the past decade.
Residents have to send in their votes by tomorrow and the council expects work to begin next month.
Mr Andrew Loh of LG Architects & Associates was hired by the council to come up with several colour schemes. Members of the residents committee then narrowed these down to eight schemes: four for the pre-war and four for the post-war buildings.
All was well, until the survey forms were sent out.
One resident, advertising executive Eugene Yip, 37, who moved there four years ago, said the proposed colours will make the area look 'very cartoonish and kiddy, like a Disneyland'.
'It's good to give the buildings fresh paint, but these colours won't enhance the ambience of Tiong Bahru,' he said. 'I prefer softer colours.'
He and other residents have written to the town council asking for better options. Several spoke of the buildings' legacy.
Accountant Edwin Leow, 38, who moved into the neighbourhood last year, said: 'A place that evokes memories of the past doesn't need such loud colours.'
Fellow resident Terence Yeung, 36, an installation artist, agreed. 'The colours proposed show a poor understanding of conservation. We will lose the authenticity of this area's charm and art deco architectural heritage.'
Built by the then Singapore Improvement Trust in the 1930s, the pre-war buildings formed the first public housing estate in Singapore.
The area, bounded by Seng Poh Road, Outram Road and Tiong Poh Road, was given conservation status in 2003.
An Urban Redevelopment Authority (URA) spokesman told The Sunday Times that owners of conserved buildings do not need to consult the URA when repainting is carried out as part of regular maintenance work.
'The exceptions are certain landmarks and categories of buildings where a specific colour scheme is part of the conservation building's architectural value.'
Examples include black and white bungalows and buildings of stone, brick tile and Shanghai Plaster finish, which are all required to keep their original appearance.
Said the spokesman: 'URA has generally given the owners of conservation buildings greater flexibility in the choice of colour because it does not affect the building structure and is easily reversible. However, we do encourage owners to use colours that would enhance the architectural qualities of their heritage buildings.'
Over the past five years, these conserved Tiong Bahru flats have attracted growing numbers of young professionals, including many from the creative industries.
Property agent Alvin Yeo, 37, who lives in one of these flats, estimates that these buyers make up about 20 per cent of the thousand or so households in his neighbourhood.
He felt going ahead with the colour schemes will affect property prices there.
A 1,000 sq ft apartment here currently costs about $550,000 to $600,000, said Mr Yeo, who estimated that garishly coloured facades may dent these prices by around 10 per cent.
'The kinds of people interested in living in these buildings in recent years resist HDB blocks because they find them boring and they want something different,' he said.
'The potential buyers from this niche group will probably just shift their interest to areas like Balestier or Joo Chiat, which still retain their character.'
But not all residents objected to the proposed colours.
Housewife Patricia Yong, 36, who has been living in the estate for 10 years, liked the pale purple option. 'It's more feminine, and it's good to give the place a bit more colour.'
Retiree Michael Tan, 57, who has been living there since 1951, also liked the suggested colours. 'It will make the place look brighter.'
Mr Loy Sai Sai, 56, the senior property manager for Tanjong Pagar Town Council, has been in charge of this estate since 1991.
He said that Mr Loh was briefed on the architectural significance of the estate.
'Colours are very subjective. We just wanted to let the residents have a chance to participate in this process of giving the whole estate a better living environment.
'We are open to suggestions. We will look at the feedback, and if a majority of residents are not in favour of the proposed colours, we will make changes.'
hxinyi@sph.com.sg
Subscribe to:
Posts (Atom)
