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Yes, There Are Deeply Angry Democratic Members of Congress
- Thread starter poyayan
- Start date
Quote from WaveStrider:
Saw an Economics prof on tv that pointed to Greenspan keeping rates too low for too long and the Fed not overseeing mortgages even though they had the authority to do so since the early '90's.
Well, if you saw an economics prof on tv, he must be right. Right?????
Funny he didn't mention that Chris and Barney and crew blocked any and all attempts to reign in the buildup of subprime loans at fnm and fre.
Is it really that hard to see that..
1 dems demanded banks make these sub prime loans
2 dems created regs for gse's and put their people in charge so that banks would have something to do with these loans
3 dems blocked any attempts to stop this practice.
Quote from jordanf:
But why is there a dearth of qualified buyers? Isn't it because homes are still tremendously overpriced historically relative to income?
It seems to me the long term solution is to get people out of homes they fundamentally cannot afford, and into housing they can. Even if this means (gasp) renting. Anything else seems like a short term bandaid and a hope for the return of the housing bubble.
This is the long term solution but if we force it in the short term it means fueling a dangerous deflationary spiral which we can not afford to let play out due to the level of public and personal debt in the US and western Europe. That is the real danger and it will lead to a global recession, probably worse.
If we stop the deflationary spiral here we buy time for inflation to do its work and cure these excesses of the past few years. Prices will come back enough to cover mortgages and let people sell their unaffordable properties at a price they can live with rather than at a price that will devaste them and their lenders. These people will then either downsize or rent.
As someone who had sold all his properties by the height of the bubble and has rented throughout this crisis waiting to pick up bargains in the aftermath (and I have put offers in on a few shorts sales this year and the banks are not cooperating, raising the price at the last minute) I am now more concerned that even qualified borrowers may not be able to get loans if things get worse, along with a possible route to another depression should this deflationary spiral continue. Then again it may be unavoidable.
Quote from gnome:
Disagree. The housing market is merely a symptom.
The root of our problems:
1. Never ending budget deficits.
2. Stupidly aggressive money-pump by the Fed.
3. Too low interest rates
4. Excessive use of credit-based consumption by consumers (and Gummint too, you know)
5. Bush mandated policy of "let everyone buy a house, qualifed or not... the perpetual money pump will keep prices up so it will all work".
6. Loan underwriters don't really "underwrite".. they "process and package" loans for dumb-ass investors to buy.
7. And then there's that whole "credit derivative" sham thingy.
Don't disagree with any of those points, all unfortunately valid. However in the short term we need to stop the decline in housing prices if we want to buy time to address the above largers issues.
Quote from Mvic:
This is the long term solution but if we force it in the short term it means fueling a dangerous deflationary spiral which we can not afford to let play out due to the level of public and personal debt in the US and western Europe. That is the real danger and it will lead to a global recession, probably worse.
Disagree. We MUST have the recession, even it turns into depression. America will eventually survive that and recover.
If we keep pressing the money-pump and inflation, nearly all of America will go bankrupt.... but later than if we "take the medicine" now.
History is RIFE with examples.... HUNDREDS of them.
Our only choices here are PAIN or DEATH.
You want your kids and grandkids to have a future, don't you?
Quote from sho-tim:
Well, if you saw an economics prof on tv, he must be right. Right?????
Funny he didn't mention that Chris and Barney and crew blocked any and all attempts to reign in the buildup of subprime loans at fnm and fre.
Is it really that hard to see that..
1 dems demanded banks make these sub prime loans
2 dems created regs for gse's and put their people in charge so that banks would have something to do with these loans
3 dems blocked any attempts to stop this practice.
Your point is flawed in one respect. I said the flood of liquidity would produce mal-investment which would find an outlet SOMEWHERE. In the '90's it was the dot-com bubble. After 2000 it went to subprime mortgages.
I don't deny that Democrats had a healthy dose of responsibility in this as well as Republicans - but the CAUSE was too much liquidity, which was a consequence of Fed policy.
It creates an accident looking for a place to happen. This time it just happened to be in the mortgages.
Quote from gnome:
Disagree. We MUST have the recession, even it turns into depression. America will eventually survive that and recover.
If we keep pressing the money-pump and inflation, nearly all of America will go bankrupt.... but later than if we "take the medicine" now.
History is RIFE with examples.... HUNDREDS of them.
Our only choices here are PAIN or DEATH.
You want your kids and grandkids to have a future, don't you?
Recession yes and with millions house poor under the any solution that keeps people in thieir homes that is an inevitability. If the deflationary spiral is left unchecked then a depression is likley and I don't think it is what this country or the world needs to go through to cure the societal ills. Its like chemo that is so bad it kills the patient before the cancer does.
I actually love the idea of these MBS tranches being broken up and the individual peices being put out for transparent and competitive bid by all. I am think that that is the best solution that I have seen yet, let the market put a value on these things since WS is not able to (because they have a vested interest in not valuing them, a reason many short sales are not going through as the sales force market valuation).
http://online.wsj.com/article/SB122211640921064247.html
Quote from Mvic:
At the root of all our problems are house prices. Can we agree on that or not? If house prices stabilized or started rising would the crisis be over or not? Yes, it would because the MBS would now be able to be valued with confidence.
So why not a solution that stops house prices from falling further? Like for example have Fannie and Freddie rewrite mortgages that people can live with, either by adjusting the rate or making them interest only or extending the term. Keeping people in their houses and paying something on their note with the caveat that when prices rise sufficiently the homeowner either sells the house to pay off the note or refinances in to a mortgage at market rates. This is a simple solution that would solve everything.
Why is it not being implemented? Because it would render many tranches of debt worthless and trigger all sorts of CDOs. Make no mistake, this bailout is all about bailing out bond holders and will do little to nothing to solve the crisis. This may seem as though it is the mother of all bailouts at $700 Billion but it will either not be the last or $700B will not be the full extent of the bailout. Housing is what needs to be backstopped, and until it is no amount of credit bailouts will solve the underlying problem.
Are mortgages available right now? Yes they are. Maybe not the 100% no money down no doc types but those are not coming back even if the banks start lending again so how is it going to help curing the banks balance sheets? They are lending now, they won't be able to lend more even if this bailout goes through because there is a dearth of QUALIFIED borrowers. Anyone qualified can get a loan NOW.
This is a bond holder bailout pure and simple and will not solve anything.
You make some good points, especially regarding who will benefit from this so called bailout. But I think housing prices NEED to fall further. Just look at the historic relationship to housing prices and rents and you can see they are still way out of whack. Also, did you ever stop to think that maybe part of the problem is the way people look at RE now, as opposed to how it was viewed historically? When I was coming up, I doubt my parents or any of my neighbors really knew what their house was worth or cared about tapping the equity. If they needed a mortgage, they dealt with a local S&L that would know real quick whether their credit was good, or if the value was there. More imortantly, they actually cared since they carried it on their books. Contrast that with what we saw over the past 5, 10, even 20 years.
I wonder, what would happen if they (govt/fed) just let these banks go under and instead used part of the $700b to reform the system so that we go back to local lenders making loans in their own area and being required to carry a set percentage on their books? Why does a local Bank or S&L need to make loans to borrowers 3 states over? Why do they need to sell all their loans to investors?
Housing prices fell for a reason.
The reason they fell was the reason they rose.
They reason they rose was a basic metric of mortgaging was violated.
Throughout history, lenders protected the money of the stockholders that they were lending by adhering to determining the size of the loan based on what the borrowers REAL income was.
The violation of the long held relationship between real income and size of mortgage not only widened the pool of borrowers but it increased the price of the house they could buy.
This not only caused prices to spiral upward but it increased the equity of those who already had some equity in existing mortgages. As old sage Arthur Cashin quipped this caused homeowners to use the increasing value of their homes as an ATM.
It is difficult to see homes start trading at increased prices if real incomes do not advance in order to not repeat the mistakes of the past.
GDP growth that we have had was owing to the increased wealth from rising home prices. The new reality is that GDP is going to have to increase on Real Production, not money that was borrowed against the increased value of one's home.
Greenspan testified when he was head of the Federal Reserve, that we were awash in a sea of global liquidity.
He should have said that we were awash in a sea of highly leveraged global liquidity.
Deleveraging is a game changer in a hurry.
America's biggest crisis is that it has NO LEADERS.
To that point, I can find a lot of fault for a lot of reasons with Ron Paul.
But he do understand the problem.
He stated the "solution" was actually the cause of the problem in the first place.
The 700 billion is an attempt to reflate what free markets seek to deflate organically.
Reflation is the prescription to what only got us to the mess that we are currently in.
It can only postpone the day of reckoning.
Our economy needs to be founded on PRODUCTIVE economic behavior which is reflected by jobs which pay a good and stable income. Not based on a Wall Street/global Ponzi scheme of more than 35 to 1 leverage.
The reason they fell was the reason they rose.
They reason they rose was a basic metric of mortgaging was violated.
Throughout history, lenders protected the money of the stockholders that they were lending by adhering to determining the size of the loan based on what the borrowers REAL income was.
The violation of the long held relationship between real income and size of mortgage not only widened the pool of borrowers but it increased the price of the house they could buy.
This not only caused prices to spiral upward but it increased the equity of those who already had some equity in existing mortgages. As old sage Arthur Cashin quipped this caused homeowners to use the increasing value of their homes as an ATM.
It is difficult to see homes start trading at increased prices if real incomes do not advance in order to not repeat the mistakes of the past.
GDP growth that we have had was owing to the increased wealth from rising home prices. The new reality is that GDP is going to have to increase on Real Production, not money that was borrowed against the increased value of one's home.
Greenspan testified when he was head of the Federal Reserve, that we were awash in a sea of global liquidity.
He should have said that we were awash in a sea of highly leveraged global liquidity.
Deleveraging is a game changer in a hurry.
America's biggest crisis is that it has NO LEADERS.
To that point, I can find a lot of fault for a lot of reasons with Ron Paul.
But he do understand the problem.
He stated the "solution" was actually the cause of the problem in the first place.
The 700 billion is an attempt to reflate what free markets seek to deflate organically.
Reflation is the prescription to what only got us to the mess that we are currently in.
It can only postpone the day of reckoning.
Our economy needs to be founded on PRODUCTIVE economic behavior which is reflected by jobs which pay a good and stable income. Not based on a Wall Street/global Ponzi scheme of more than 35 to 1 leverage.