Hmm. I need to get me a workshop.

I have heard that mortgages being callable was changed after the great depression. Now, as long as you make your payments, they are not callable.

I could be wrong.

Flap

Flappingeagle: You're wrong. Sorry. :(

[Edit: You might be able to get it written into the contract, but if you pursue the fine print, I'm quite sure you'll find it in every loan.]

How come banks that go bust typically don't call their mortgages?

Maybe there's a difference with home loans?

I know commercial loans can be called at any time though - for sure.

Mortgages are typically securitized, and most securitized loans are not callable.

However, any commercial operating line is typically callable, and I've never seen a small-business loan that isn't -- although the clause is often hidden somewhere in the loan agreement.

The point is not whether a mortgage is callable. It is that the use of leverage is inherently dangerous and it only "works" on a risk:reward basis during an inflationary credit boom. The reason for this is quite simple -- banks don't stay in business losing money on a risk-adjusted basis, just as insurance companies don't write losing insurance policies on purpose. Therefore on average you will always lose on a percentage basis, which means your entire strategy devolves down into "do it bigger and faster so the gross numbers are bigger.

That means you are reducing error margin just to stay even, and you're really reducing it if you structure things so you can get ahead.

Yep had it happen to a Door business in Texas. Bank came in and closed down the plant by way of calling in their line of credit. Business as normal on Thursday and closed on Friday.

Wow. I didn't consider myself particularly naive until I read this thread (esp that my business loan could possibly be "called"). I did have an attorney review it before I signed it, but if "calling" is normal, perhaps he wouldn't have highlighted it.

I'm 6 years into a 10-yr business loan and doing OK (I bought a profitable business and have added no other debt. Personal debt is just mortgage, in which we have 50% equity and a good homestead).

My main "asset" to the bank and the reason I had lenders competing to give me a loan is because I can produce (some lenders put life insurance on a professional LOL). So I would think as long as I am making payments they would not want to call the loan. OTOH, we had to sign a personal guarantee (though no direct liens on anything) so I suppose they could see us as a target because of our land and home?

Is this one more thing I should be scared of? My real problem is my husband doesn't take any of this seriously and thinks I'm wacking out.

Quote:

Atlas: Any time credit is created to buy the bonds (e.g. by a bank, by the fed, etc) the GDP impact is inherently double-counted since the government spends the funds yet it didn't come from someone's capital -- that is, it's not a transfer of wealth to liquidity.

The premise of ignoring debt in economic analysis is that all debt is at the core is a temporary exchange of wealth for liquidity. Government deficits never behave that way and thus they should be subtracted off from gross GDP numbers.

Just to be sure I understand (cuz "creation of money" can still make my head spin), can it be stated like this:
The Fed is buying the portion of government debt defined as deficit (which of course the government is spending to increase GDP), and that "new money" the Fed creates is also being loaned out via the banks. ?

What about deficits spent by making bond sales to foreign investors? That clearly represents debt to all of us, but not necessarily showing up in the GDP numbers? What am I missing?

KD wrote..

This is how I built MCSNet. I started it literally in my closet with a PC running a customized Unix OS and a handful of modems; there's still the upper floor of a 2-flat in Chicago, I suspect, that has a big fat telco cable coming into that closet. With the thing called "profits" I grew the company, rented a small office and then a much bigger office. I started with just me while working full-time at another job, got laid off, then added one person, then ultimately more until it was roughly three dozen employees. If you need more funds than you can obtain from operations sell some equity to people who are either accredited or exempt (e.g. family with capital.) Resist the temptation to grow at a speed which exceeds what you can self-fund; it is very tempting but in this sort of economic environment it is an open invitation to an instant disaster -- don't do it.

Yep.

I started mine literally in my garage 12 years ago while I was being "Mr. Mom" for a few years after second kid was born. A year and a half later, my wife quit her lucrative consulting career to become my first employee. We kept the business in my house for the first four years. At the end of that time, we had five people showing up for work there at 9:00 every morning, and UPS and FedEx doing both a delivery and a pick-up every day. All of that activity in our home did eventually get under my wife's skin, so I rented a small office at first, and 3-1/2 years later, a substantially bigger one. The business has never owed anyone a dime except for Net-30 trade credit, which always gets paid sooner than 30 days and is entirely a matter of convenience rather than need. We've currently got 15 employees. Not being beholden to creditors (or even investors!) is by far the safest way. It's like having both airspeed and altitude when flying; if the engine quits, you've some time to figure out how and where you'd prefer to land. Our engine did run slightly rough during 4Q2008 and 1Q2009, and we temporarily lost a bit of airspeed, but were able to maintain altitude. It's run well ever since.

-Uwe-

Kareninca, seems you have a lot of free time and some good weed!

Excellent and very helpful Ticker, Karl!

No weed ETB, I'm just an overeducated hausfrau in Silicon Valley, where ideas for businesses are encouraged. However, I don't need or want to start one myself. Unfortunately my unemployed friends would rather find a job than start a business, and I don't blame them - everything is regulated, and every regulation is enforced, except for the ones that ought to be.

Okay (since Karl hasn't told me to shut up), here's another business idea; however something would have to be created for it to exist. Floor coverings that have the qualities of carpets - flatness and sturdiness - but that can be *put through the washing machine.* Nothing inanimate is actually clean unless you can put it through the hot cycle and then the dryer. Any female would LOVE to buy these; even me, and I am really frugal. The pieces would have to be small enough to fit in the machine; they'd have to be flexible enough to go through the cycles, but then flat and stiff enough to be safe floor coverings.

Also, I have never understood why lava lamps come in so few versions. Why are there none with, e.g., oozing eyeballs thrown into the mix?

Another product that would be popular: a desktop device that creates a hologram that explodes or otherwise destroys the three dimensional image of a despised person or item. I would enter the image of a Cadillac Escalade, but that's just me.

House cleaners who advertise themselves as cleaning *helpers*. I would never hire someone else to clean our place, but that's me. What most women (yeah, women) do is tidy up beforehand and then hide or leave when the cleaning ladies come. However, there is a market I bet for a cleaning lady who would come and help the homeowner clean; they would both clean together. It would take less time, thus cost less money (that would be the marketing edge), and the woman hiring would then be less averse to hiring someone from a socioeconomic class that is similar to her own. Which in this economy, and with Mexican demographics, is going to start to happen.

Markgoldman, your dog is adorable.