Irrational finance

World Net Daily ^ | July 6 2009 | Vox Day

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One of the more remarkable things about the expansion of the subprime financial crisis into a general economic contraction is the Federal Reserve System's narcissistic focus on itself. In his speeches, Ben Bernanke spends more time talking about the Federal Reserve's balance sheet and how stupendously fabulous it continues to be despite the vast quantities of loans it is making to shore up various aspects of the financial system than he does about the unemployment rate or the expected effects of economic contraction on the public.

It's rather like a seeing a speeding school bus full of children smash into the school in front of the horrified eyes of the children's mothers. Then, after the crash and a subsequent explosion, the bus driver emerges from the cloud of smoke surrounding the wreckage and assures everyone he is all right, that, in fact, he has never felt better. But the health of the driver is no one's primary concern.

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In a recent study of subprime and Alt-A loans by Wells Fargo, it has been shown that banks continue to prefer foreclosures and liquidations to loan modifications involving writedowns despite the fact that: a) the average writedown amounts to only 6 percent of the loan value, and, b) the average loss per writedown is only $13,077 compared to $141,953 per liquidated foreclosure. The average loss per the average loss on those was 64.7 percent of the original loan balance.

This tells you that their stated goals and their real goals are two different things. Clearing the economy of bad mortgage debt isn't the point.