Posted on 12/10/2007 7:13:37 AM PST by shrinkermd
The home has long been the bedrock asset of most American families. Now, its value has become the biggest question mark hanging over the global economy
Over the past decade, Wall Street built a market for more than $2 trillion in securities sold globally and backed by loans to U.S. homeowners on two long-accepted beliefs and one newer one. The prevailing logic: The value of the American home would never fall nationwide, and people would almost always make their mortgage payments. The more recent twist: Packaging mortgage loans and turning them into securities would make the global economy more resilient if anything went wrong.
In a matter of months, though, much of the promise of the new financial architecture -- together with its underlying assumptions -- has proven to be a mirage. As house prices fall and homeowners default on mortgages at troubling rates, the pain has spread far and wide.
So far, the potential losses look manageable compared with the savings-and-loan crisis of the 1980s and the tech-stock crash of 2000-02. But the housing debacle could yet take years to work out
To ease the pain, the Federal Reserve has cut short-term interest rates twice and is expected to cut them further tomorrow. The Bush administration has also pressed for private-sector curative measures. First, it urged big banks to create a new entity to buy some mortgage-linked securities that don't have a ready market now. And a plan finalized last week calls for freezing interest payments on perhaps hundreds of thousands of qualifying homeowners whose mortgage notes are set to rise. Both ideas are controversial. They are hailed by some as well-conceived financial first aid and criticized by others as inadequate -- or an impediment to crisis resolution.
(Excerpt) Read more at online.wsj.com ...
And we survived both of those. Imagine that. It might not be doomsday.
And we survived both of those. Imagine that. It might not be doomsday.
Only if the S&L crises was a hysterically over blown non crises that effects 95% of American home owners not at all.
Maybe we did. Hopefully we learned to not use the Fed Govt to bail out fat cat Bankers who make stupid load decisions.
This “crisis” exists only in some mega bank board rooms and the US Junk media ignorant drama queen minds.
I’ve seen final-tally numbers for the S&L fiasco in the $120B area. With UBS coughing up another $10B in blood today I think we’re up to about $80B so far. We’ll get there, and then we’ll pass it, and then we’ll keep going.
That's cost to the taxpayer.
With UBS coughing up another $10B in blood today I think we’re up to about $80B so far. We’ll get there, and then we’ll pass it, and then we’ll keep going.
That's not a cost to the taxpayer.
More scare-mongering so that Wall Street can bail themselves out... meanwhile our dollar goes into the toilet and the rest of us are paying $3 per gallon instead of $2.50 per gallon so that lower interest rates can bail out guys making $5 million bonuses.
And going, and going, and going.... Right?
Dittos from Texas. Alan Greenspawn raised the usury rates much, much too high, so minds are at work to roto-rooter Alan's sewage drains.
The matter at hand is the scale of the problem.
Hydroshock is still banned. Or maybe his doom and gloom was so heavy, it collapsed into a black hole and pulled him in.
Yep. Wake me up when admitted CDO losses break $300B. Then we can order another pitcher and start to ponder what the final tally will be.
But that’s going to be a cost to the economy.
If the banks lose their shirts, they are going to tighten up the credit regardless. Companies won’t be able to issue bonds to expand, Venture Capitalists won’t be able to fund new startups, Home buyers won’t get mortgages, Small Businessmen won’t be able to get affordable loans.
Who do you think will come in a pick up the slack?
China.
While we're at it, let's end the government guarantee of Fannie and Freddie, and indict Franklin Raines.
Nah, the Chis made the mistake of holding their reserves in dollars, and are getting creamed by the falling dollar. Our depreciated dollar and the inflation in commodity prices has helped out the oil producing states more than anyone else. In other words, it may very likely be petrodollars from the Emirates/Qatar/Saudi that will bail us out.
What cannot be learned, apparently, is how not to let schemers take control of major financial institutions. Furthermore, most of them get away with it. A few sacrifical goats are offered up. but most go off into retirement with huge amounts of money.
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