Posted on 08/04/2007 10:36:23 AM PDT by ex-Texan
Jim Cramer today angrily called on Federal Reserve Chairman Ben Bernanke to lower interest rates, saying he "has no idea how bad it is out there" in the nation's credit markets.
In his "Stop Trading" segment on Street Signs today, Cramer said the nation's central bank is "asleep" and should immediately "relieve the pressure" on financial firms and the nation's home owners who are facing big increases in their mortgage payments as 'teaser' rates expire. Many thousands will "lose their homes," he warned. "This is not the time to be complacent."
About an hour later, he made a return appearance on CNBC's Closing Bell to soften his initial comments, making it clear that he is not recommending investors sell stocks. He predicted a big rebound for the major stock market averages if the Fed does indeed lower rates, and said he was upset by Bear Stearn's Bear Stearns Co Inc [BSC] "complaining" during a conference call earlier in the afternoon. "I don't want to scare anybody," he added. "The Fed can make this whole problem go away" by lowering interest rates.
Standard & Poor's changed its rating outlook on the firm to negative from stable this morning.
NOTE: There is a MUST SEE Video at the primary link. Why? Jim Cramer losses it on the air.
"Many thousands will "lose their homes . . ."Well, in actually, maybe even hundreds of thousands. May be even more. Hundreds of thousands will lose their homes IF they purchased them since December, 2004 and took Greenspan's advice and used one of those exotic loans: An ARM loan with a very low 'teaser rate' or an option ARM that adds unpaid interest at the market rate to the loan balance (negative amortization). Especially if the home buyer paid too much for the home and/or refinanced to purchase a new SUV, pay off credit cards or take a trip to Europe.
Bernanke is toast. If he lowers rates to save home owners who followed Greenspan's advice he will anger all those foreign government who holde U.S. treasuries. But China and the Saudis are already unloading US debt paper. If he does nothing, leaving homeowners trapped in mortgages they cannot refinance, angry people will be parading in the streets. And where is the culpret (Greenspan) when people really want to confront him? I dunno, do you?
Oh, well . . . Not for me to worry, anyway. I'm just a geezer in Oregon.
*Ping* !
It is frankly to late for thousands of homeowners who bought more house then they could ever afford. Even if the rates were dropped, the values of the properties are down in many areas and tehy could not get refi’ed do to being upside down. The best thinkg to do to restore sanity in the home market is let this happen and the tighten lending standards.
*BINGO* ! . . . I agree 100%. But Cramer would never go that far. Not yet. He still is very hopeful about the stock markets. After all, he makes his living talking market news and telling others how to make money. Cramer is still an establishment type of guy. He is used to hobnobbing with Walls Street gurus and wealthy corporate CEO’s. But it was a lot of fun to watch him go ape, wasn’t it?
Good news for investors with cash.
That man desparately needs ritlin.
House buyers, mulit buyers, spec buyers, flip buyers and the agents and finance companies have all had a great ten, at least, years. And will in the future. Right now they got to play by the rules.
For the patient and thrifty, and those that were priced out of their desired house, now is a great time. Why should they have to take up slack? They shouldn’t.
By and large the house building boom has been fantastic. It has created an excellent housing stock and many people have improved the quality of their house situation.
We don’t have a problem with private cars, supply, finance, or price range or location in this country because the gooberment isn’t involved. We could be in the same state with houses, but of course as with most thing in which the gooberment is heavily involved in, the common solution seems to be more gooberment.
And not to be self-congratulatory, but why do ppl get into this mess? I bought a home in '01 in NJ, known for high prices and high property taxes, paid under 200K, put $35K down, with a 20 yr, 6% rate fixed mortgage. Why is this so difficult to manage if a half wit like myself can hack it? 2 car garage, 1/2 acre, big deck, 2 full baths, fireplace. It's not that tough.
I’m an expert. Not only do I have an M.A. in Econ, but I have lost my A** in stocks, commodities, and real estate (on separate occasions, thank G-d). After many years of observing markets I have decided that the Fed and other gov. only need to intervene when there is extreme danger of a real crash. Otherwise, it is best to allow the markets to discipline foolish investors, lenders, et al. Pain teaches wisdom.
One of the hidden reasons you make people come up with a down payment is to prove they can save money. And remember debt is one of the ugliest 4 letter words there is.
Now that the interest rates have gone up, and half of the idiots with the ARMs are defaulting, all you hear now is the mortgage shysters pushing fixed-rate loans.
What a bunch of crooks.
No, they will stop buying US Treasuries. Who wants to put money in a currency that is losing value and is paying little interest?
Many can not refi, they are upside down on the note. I expect to see many just walk away from their homes in the next 12 months
Just to follow up on your thought darth I’ll assume now is not the time for the Fed to lower rates?
I watched Ben Stein on Cavuto this morning discussing this issue. Ben claims the actual default on sub-prime loans represents something like .007% of the overall economy at this point in time. So if everybody in jeopardy defaults it’s just a blip economy-wise.
Seems as though Ben agrees with you.
I say let it play out, but look at tightening lending standards in the future.
But you need to take a little trip out to see La La Land. People out there are crazy. Something about the Movie Biz must infect the population.
Normal three bedroom houses in nice (not great) areas were selling just six months ago for about $ 1,250,000. People in California make more money than in other states. Very common for a man and wife to bring home over $ 180,000 /yr. But nearly 1/25 people in California have real estate licenses. They want to rub shoulders with the rich and famous.
Everybody in Sunny CA jumped on the house flipping craze. Total newbies went out and bought trash fixer-uppers in cracktown for $ 500,000 +. Their goal was to flip the houses for $ 150,000 profit. Everybody wants to get rich quick.
Now prices are falling rapidly. Realtors do not want to talk about it. But prices have fallen 10% to 25% (or more). People in the biz always talk in positive terms about homes. Even when they are going bankrupt.
And now what is going to happen? More and more California based mortgage lenders are laying off staff and locking their doors. Banks have been hit hard. Car dealerships have been hit, too. Not to mention all those unemployed realtors. What is going to happen next? When one half of the monthly income stops coming in for people who bought a three bedroom house for $ 1,000,000? You have not seen anything yet.
Exactly, the dominos are starting to fall.
I understand my situation very well. I bought and eventually paid for my home some time ago. The problem that I see is the relationship between income and the price of a home. In the past few years I saw people going out a buying homes that were two or three maybe four times what my home is valued at. But their household income was in most cases not even one and half times mine. Had I been in the housing market I am sure there were lenders who what have told me that I could have afforded a lot more house than I have, but I would trust my common sense and life experience to tell me what I could or could not afford more than some lender looking to score on a loan irregardless if they were doing the right thing by the borrower.
Always be leary of financial advise from soneone who makes money from you spending more of it.
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