Posted on 10/04/2008 6:04:13 PM PDT by CK Young
bttt
-bflr-
The FED is a business cartel in the mode of the 19th century trusts. Except this cartel can call on the federal government to enforce its proscriptions.
socialism - it is what’s for dinner!
So it took 95 years for the collapse to happen? What signs of the collapse are you seeing?
So what we have here is the collapse of the Ponzi. That can only be remedied by massive devaluation of the dollar. However the main goal of the FED is to “save the banks” screw us. They must be holding down the price of gold somehow.
If the 2005 Fanny Mae and Freddy Mac reforms had passed.. we would have had a recession in 2006 or 2007 and this was avoided by letting the Sub-Prime thing go wild for just 12 additional months. That was enough using the bizarre derivatives that were allowed in the CRA and non-reforms that were adopted to "help" Fanny Mae to see the fuse on this mess.
But, worse, Wall Street insiders have their hands all over this and they are backing Obama.. why? WHY? Why is Obama getting information from Paulson's office via Goldman Sachs?
You’re missing a key component: a loss of confidence on the INSTRUMENTS for Mortgage Backed Securities.
This is so important but it seems that no one is talking about this.
Didn’t these INSTRUMENTS come into play because were trying to hedge their risky loans that the gov’t was forcing them to make??
And your deposits were then put in junk investments and now thinks to congress and their great foresight the bankers get their cake and eat it to. But a bunch of them should be going to jail.
“So what we have here is the collapse of the Ponzi. That can only be remedied by massive devaluation of the dollar.”
Actually what’s happening is a massive devaluation of assets vis a vis the dollar. Have you checked your house or stock value recently? You need a lot less dollars to buy them today than you did one ot two years ago!!!
“Didn’t these INSTRUMENTS come into play because were trying to hedge their risky loans that the gov’t was forcing them to make??”
It’s a snow-ball effect, I’m afraid ie government mandates were definitely a factor. The loans by themselves aren’t resulting in high foreclosure rates.
“The total foreclosure losses are currently less than 1% of the value of outstanding mortgages, which is far less than the market losses caused by the disruption of the credit markets.”
Read this:
http://www.geoffweathersby.com/wordpress/?p=20
As noted is not a matter of too many units being built, either.
“The demand for new homes collapsed after the MBS market declined, freezing the availability of a substantial proportion of the capital for home loans. The builders, and ultimately their employees, investors and lenders have all been impacted by the flawed MBS instruments and the paralysis of the financial markets these faulty instruments have created.”
Lets look at these MBS:
“we need to be clear about why the flawed MBS instruments failed:....
# The typical MBS instruments do not segregate individual mortgages into individual units of each tranche. This led to the unenforceability of the underlying security as previously discussed. It also led to the lack of information about the presence of impaired loans in any specific unit of each tranche of the MBS instruments.
# The incomplete information about impaired loans led investors to significantly undervalue each unit of tranches of MBS instruments. The market value of MBS securities has fallen 30 – 50% (or more) even though the overall mortgage foreclosure rate has resulted in losses of less than 1% of the value of outstanding mortgages.”
What we have here appears to be the collaps of the “Debt Reserve Note”, or the dollar which is only a dollar because Peter owes us a dollar, and he has to pay Paul, so that is basically a dollar. Peter borrowed ten dollars, so he owes us twelve dollars, so we have in fact twelve dollars, although we have nothing. Actually.
bump
“The Federal Reserve is not the cause. This is lame.”
I totally agree. The cause is very simple:
- The banks were making loans to people that they knew would never be able to repay them.
Why would they do something that stupid? Because they didn’t keep the loans for the most part - they sold them to dumb investors who believed the AAA ratings that Moody and other rating agencies attached to them.
It was a total, massive breakdown on the part of the banks, credit rating agencies and investors.
To distill it even further - it was lack of due diligence - even if just one of the three participants (banks, rating agencies and investors) had done their due diligence, we wouldn’t be where we are now.
Point #12 is HS. The problem was not that Bernanke raised interest rates, but that Greenspan kept them artificially low for 20 years and expanded credit beyond anyone’s wildest imaginings. The ballon was going to burst sooner or later. It did with the dotcom burst but Greenspan then created the real estate bubbble.
Good post, good link (I especially liked William Becker’s comment on May 2, 2008).
Very good thread. Thanks to all posters.
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