The ongoing crises - The Sub Prime disaster

[a_unique_person]

Every day I listen to my 'reputable' news sources, the Australian ABC which is our equivalent of the BBC, there is a good chance there will be a story on the sub prime crises.

The recent action to let some borrowers off the hook is only a small part of the story. The real story is the endless billions of easy credit that governments are handing out to the big banks at the moment.

http://www.abc.net.au/worldtoday/content/2007/s2117886.htm



ELEANOR HALL: But first, the worsening crisis on global financial markets has prompted emergency action overnight from five of the world's key central banks.

The unusual joint action, led by the US Federal Reserve, will start with a $20 billion cash injection, which is designed to build trust in financial markets and particularly between banks.

The move comes after yesterday's plunge on Wall Street and is an attempt to stave off the growing likelihood of a recession in the world's biggest economy.

Business editor Peter Ryan has the story.

PETER RYAN: In terms of global cooperation in a crisis, today's move is the most significant since the September 11 attacks on New York and Washington six years ago.

One trader described the intervention as "shock and awe" with an initial cash injection of US$24 billion designed as the opening shot in a war on the credit crunch.

PETER DUNAY: I think they're going to try and pump as much as they need to to make sure that the financial institutions have the liquidity they need.

PETER RYAN: Peter Dunay of Leeb Capital Management in New York says the emergency strategy from US Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank is designed to restore confidence in financial markets and ease a climate of fear and suspicion.

PETER DUNAY: You really want to create a situation where the banks are willing to lend to each other, where they have enough confidence as well as enough capital and that's what this is designed to do. Right now there is going to be a currency swap of about $24 billion and there'll probably be a lot more behind that.

PETER RYAN: The plan is to effectively auction off cheap money in four tranches over the next six weeks.

The winning bids will give banks access to discounted interest rates to help ease the squeeze and put cash into draining financial systems where anything associated with risk has been avoided in recent months.

And that means one key question is critical to the solution.

DAVID BUICK: Do the banks trust each other to lend money?

PETER RYAN: David Buick of Cantor Index in London is cautiously optimistic but realistic about the fear factor.

DAVID BUICK: It's all very well making these facilities available but what this has to do is create a climate of trust whereby banks are prepared to lend each other money at something remotely looking like the normal rate of interest rather than the inflated one. And we've got a long way to go before that actually filters through.

It's a start in the right direction, but now we have to see that translated into wholesale trust right across the spectrum for it to really work quickly.

PETER RYAN: Some economists believe it's too little, too late, and that the US Federal Reserve should have acted earlier to ease the impact of the widening crisis in subprime mortgage defaults, which is now threatening a recession in the world's biggest economy.

Which makes today's intervention from the world's big five central banks even more significant.

DAVID HALE: Because there has been concern for several weeks about the fact that we have relatively high inter-bank lending rates in the money markets.



Lots of easy money out there from the government, but not the free market.

[Francesca R]

It's not "easy credit". It's credit on the terms that central banks ordinary open-market operations would have provided in the first place, were it not for money markets being dominated by excessive fear. These reports often read as though money is being given away or lent for zero interest. In fact it is nothing of that sort.

I am reasonably convinced that this is what central banks should do in current circumstances. They could go too far, by cutting policy interest rates or by lending (as last resort) to dodgy borrowers. It is impossible to remove any danger of this happening of course. I don't believe that are going too far.

I am sceptical of the reaction that one sees in equity markets, especially emerging markets, that this somehow means that stocks can trade to new highs.

[a_unique_person]

It's easy credit, in the sense that it's easier than free market credit.

[Francesca R]

But there is not intended to be a free market in overnight and short term borrowing. It is in all central banks' mandate to infulence the price of it.

[a_unique_person]

Which they are struggling to do at the moment, since banks are reluctant to lend on the short term market at the moment, apparently.

[Francesca R]

Yes, hence the merit of "lender of last resort", if all banks are reluctant to lend

[a_unique_person]

And more today.

http://www.abc.net.au/worldtoday/content/2007/s2119040.htm



Today Australia's second largest shopping mall owner suspended trading in its shares ahead of an expected profit downgrade because of the steeper borrowing costs.

The Centro Properties Group is attempting to negotiate terms for $5-billion worth of loans which fall due in three years.

And financial markets have reacted cautiously to yesterday's move by the world's big five central banks to stem the credit crisis, amid criticism that the action is too little, too late.

Business editor Peter Ryan reports.

PETER RYAN: Australia's big four banks have already made it clear that the higher cost of money means a lower bottom line for them, and that sooner or later they'll resist political and community pressure and pass on the cost to borrowers.

But others in the corporate sector, who can't necessarily absorb the new costs, are starting to struggle.

The Centro Properties Group is one company facing tougher times amid speculation that it will be forced to issue a profit downgrade.

The nation's No. 2 owner of shopping malls also has $14-billion worth of assets in the United States and $5-billion of debt on its books.

But the US property slump, uncertain economic times and a shaky US consumer, means shopping mall tenants are a greater risk to lenders, and so Centro is now facing higher borrowing costs for the higher risk it didn't expect.

An Australian company might be small on the world stage, but companies like Centro are hoping yesterday's Central bank intervention to ease the credit crunch will work.

EXCEPRT OF CNN BULLETIN: The major central banks around the world, not just the United States, are launching a coordinated assault on the credit crisis. This is the Federal Reserve…

PETER RYAN: But financial markets are sceptical about the fighting words.

The London Stock Exchange fell three per cent overnight, and on Wall Street the Dow Jones Industrial Average closed just a third of one per cent higher as investors tried to see the positive side.

MICHAEL LEHMAN: I think it's a good idea and anything the Federal Reserve can do to help is of course welcome.

PETER RYAN: But economist Michael Lehman worries the intervention by central banks in the US, Canada, the UK and Europe might be too little, too late.

MICHAEL LEHMAN: The measures the Fed have taken, while they're welcome and appropriate, they're not going to be enough to offset the damage done.

PETER RYAN: And the subprime related casualties continue to mount.

Today, a Wall Street listed bond insurer, Security Capital Assurance, went to the brink of losing its triple-A rating because of the aversion to risk, when the Fitch ratings agency revealed it was $2-billion short of the required cash in the bank.

EXCERPT OF NEWS BULLETIN: The company has lost 52 per cent of its market value in just the last three trading sessions. SCA has forwarded six weeks to come up with what Fitch terms as firm capital commitments to meet the guidelines.

[Francesca R]

Overall, stock markets would most probably be a lot lower without the central bank actions. I find it surprising that they have been so well supported. For all the 2%+ down-days, there have been almost as many recoveries of similar magnitude. Yet no central bank is doing this to prop up stocks.

[hipparchia]

I write for a business publication and yesterday the latest intervention of central banks made page one. Otherwise, I write almost every day about the effects of the sub-prime crisis.

What the central banks are doing is correct- trying to control the overnight rates to be at the desired levels. Otherwise, what you get is expensive credit.

The biggest doubt is whether the credit markets will be lively again in the near future like they were in the first and second quarters of this year.

I recently went to an explanatory seminar at the European Central Bank. Basically, the bank has not given away money after August 9th. What they did was to allocate more of their monthly lending at the beginning of the month and then give less and less and take back the short term loans. It was supposed to tell the banks that money is available and there is no need to hide away their resources from other banks.

[a_unique_person]

The crises goes on.

http://www.abc.net.au/worldtoday/content/2007/s2121666.htm

http://www.abc.net.au/worldtoday/content/2007/s2121674.htm



ELEANOR HALL: Yet, Centro's management says they should never have expected that their funding would dry up in this way. I mean, should they have been more wary?

STEPHEN LONG: Definitely. And that excuse isn't cutting the mustard with a lot of people in the markets, for various reasons. One is that for years central banks around the world have been warning that risk was underpriced in markets. And also we had key analysts last year, and I was doing reports last year, saying that there was a risk of a credit crash coming because of the exposure in the credit markets through these fancy financial products, your collateralised debt obligations and derivatives, and people have been talking about the woes in the housing market.

Now, it's true that this is perhaps an unprecedented credit crisis, but to say that they couldn't see it coming, it's a big call, and then when it did hit in August, there are steps they could've taken to mitigate their exposure, which they didn't take because they made a bet that things would get better, that the credit crisis would ease, and instead it's got worse.

ELEANOR HALL: Now, there's … talking of the central banks, shouldn't there be a whole lot more money available, given what the central banks of the world have pumped into the market just recently?

STEPHEN LONG: Well, per … well, they have pumped a lot of money in to maintain liquidity. The problem is that really that's a medicine for the wrong illness, the wrong disease. It's not just the expense of money that's the problem, it's the fear in the market, the fear about who's exposed, and you have a situation where banks are unwilling to lend to other banks because of that fear.

Now, the big test will come, Eleanor, overnight, when there's the first auction of this new cheap money that the Federal Reserve in the US announced last week in conjunction with other banks, that it would be auctioning off to the world's big investment banks.

If that goes smoothly, at least in the short-term, things could get a bit better. If it goes badly and the auction tanks, then things could get really, really bad.

But beyond that, I think that we are looking at a serious situation because everyone is expecting big write-downs by the world's big investment banks in the second half of January, when they have to report their earnings, and more problems with the money that they've spun off their own accounts, into these special funds that they've got out in the debt markets.

[hipparchia]

The funny thing is that most experts in Bulgaria believe the real estate sector will remain unaffected by the crisis and continue with the double-digit growth of recent years.

Now the European central bank is providing limitless 2-week funds of about 500 bln. euro. Will wait and see what is the effect of this intervention and whether it will resolve the crisis of confidence that really ails the banking sector.

[hodgy]

A_unique_person,

Did you have a point to make here or just bringing these quotes to our attention for the sake of interest (no pun intended)? Fine, if the latter - just wondering.

[a_unique_person]

A_unique_person,

Did you have a point to make here or just bringing these quotes to our attention for the sake of interest (no pun intended)? Fine, if the latter - just wondering.

They just keep coming up with these stories every day on our equivalent of the BBC. Is there something to it, or are they just glad to have a topic that sounds important to pad out their current affairs shows during the silly season?

[Francesca R]

Well if you watched Bloomberg TV or something like that you could get this 24/7. It's news depending on your interest level. It's not business-as-usual in the money markets, for certain.

Mainstream BBC news has not focussed on the fixed income market situation much, but coverage rises if the woes of a UK firm (like Northern Rock) feature. Centro is high profile for Australian news, but I only read about it on financial market newswires here.

[a_unique_person]

The gist of the story appears to be.

If you are tied into short term finance to run a long term investment, you could be in real trouble.

Using short term debt for long term investments was becoming quite fashionable for a while.

Is that right?

If so, how many more businesses are going to be in trouble.

[Francesca R]

The gist of the story appears to be.

If you are tied into short term finance to run a long term investment, you could be in real trouble.Of course you could be. It depends on your leverage and the terms of your short term finance. If your short term borrowing is all in the overnight money market, you have to pitch up to that market every day and take the rates that happen to be on offer. You're as exposed as you can be. If you are financed through private equity locked in for 15 years, you don't need to read about any "credit crisis".

Using short term debt for long term investments was becoming quite fashionable for a while.It's more than fashionable—it's a business model used throughout the banking and investment industry. Borrowing short and lending long is a reasonable approximation of what all banks do.

[a_unique_person]

Fair enough, but banks are a special case. They are highly regulated, and, as is the case now, have special, government backed, access to funds if they run short.

[hodgy]

They just keep coming up with these stories every day on our equivalent of the BBC. Is there something to it, or are they just glad to have a topic that sounds important to pad out their current affairs shows during the silly season?

Understood - thanks.
I think Acuity sums it up well.

[Nogbad]

A key difficulty is that without perfect knowledge available to all the players in the market sentiment becomes a key factor in determining movements. If there is an underlying fear that banks have exposed themselves to potentially excessive bad debts people start to worry. Now it may be that most of Northern Rock's debtors will pay up, the provision for bad debt overstated and the bank will turn a tidy profit. Those who fled the business will then lose out. The difficulty is that sentiment can turn into a stampede and become a self fulfilling prophecy.

The US real estate market is depressed and some home owners do have negative equity. However, the majority of home owners buy a house to live in and if they can will attempt to see the rough patch through as long as they retain their jobs and can pay their mortgages/loans. If they have to move and they obtain less than they paid for the house they will still presumably want a house to live in and should be able to obtain another one for a similarly depressed price - taking their negative equity with them at no further loss. The real difficulty comes with a more general recession and attendant job losses. There is a real fear that too much has been lent to too many who have no margin for error. These pigeons have not come home to roost in a significant way (yet). If they do there will be feathers flying in some banks.

The sky might fall is always newsworthy.

The sub prime issue is a potentially serious problem rather than a current one.

[Grimoire]

Fair enough, but banks are a special case. They are highly regulated, and, as is the case now, have special, government backed, access to funds if they run short.
Whereas before, they had access to non-special, non-government backed funds. That dried up due to market fear (yes, that is a simplification). Should the central banks allow all banks involved in ABCP collapse due to a lack of short term funding?

[a_unique_person]

More gloom and doom

http://business.theage.com.au/americans-walk-from-loans/20071223-1iqr.html



THE Dow soared 200 points in a Christmas rush on Friday that belied emerging details that US banking, mortgage companies and credit rating faced collapse while the nation's mortgage insurance industry plunged into chaos.
Nearly 180,000 US local councils were placed on credit watch, with the credit agency Fitch releasing another $US5.3 billion in credit downgrades involving 27 mortgage companies. The news emerged on Friday night, when the nation's newspapers, even if they were following the story, would miss it.
That one company could downgrade 27 major financial institutions in one stroke is stunning, but it follows a swathe of credit downgrades that swept the US on Thursday and Friday.
There has been a major falling out between mortgage insurers, credit rating companies, banks and mortgage institutions, which believed their loans were insured, only to be stunned to find themselves booted into the mire that is American banking.
Chinese, Singaporean and Arab sovereign investment funds seem to offer the only salvation for the US banking system.
The depth of the housing crisis was underscored by the head of one of America's largest banks, Bank of America, the straight-speaking Kenneth Lewis, who warned of a completely new attitude by Americans to their homes amid fears that as many as 20 million householders may "walk" from them, further deepening the crisis.
Lewis' comments came as a new expression - "jingle mail" - referring to the growing trend where Americans mail the keys to their homes to the lenders before vacating, entered the US lexicon. Figures for November revealed more than 200,000 US homes were foreclosed, a 68% increase on November 2006.

[a_unique_person]

But the drama now unfolding surrounds the mortgage bond insurers and the credit agencies.
Insurance is taken out in the hope it will never be claimed. However, the insurer has to assume it will be claimed and therefore ensures the premiums are safely invested. The banks, some earlier than others, realised the threat to their mortgages and took some, not nearly enough, insurance from companies such as MBIA and ACA.
As the loans had been sliced and diced, it must have been difficult for actuaries to calculate what insurance was necessary. Even to this day, no one knows who owns and owes exactly what. The CDOs are, after all, collectivised.
It turned out the risk was great and the insurance was needed. Then came the surprise.
The insurer had invested in the very thing the insured was fearful of, the collapse of the value of the CDOs.
Morgan Stanley then commented: "We are shocked that management withheld this information for as long as it did. MBIA simply did not disclose arguably the riskiest part of its CDO exposure."
But they did. Not to JPMorgan or Merrill, but to the insurers, which evidently didn't hear, didn't realise or didn't think it worth passing on to the major mortgage institutions that their insurance money was tied up in the same risky ventures these companies were trying to protect themselves from.







from the same article. If that's true, it's a worry for many institutions.

[Tokenconservative]

Not sure what the "subprime" crisis might be in other countries.

Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

Tokie

[dann]

Well, it’s certainly more than “a fairly mundane and low-level market correction” to the millions of people who risk losing their homes: http://www.democracynow.org/2007/4/4/subprime_lending_crisis_millions_of_families
http://www.dailybulletin.com/business/ci_5939817
““… the number of default notices sent to California homeowners during the first quarter of this year rose to the highest level in almost 10 years. The reasons are varied: flat appreciation, a sales slowdown and the resetting of interest rates on loans that started with low "teaser" rates.” … and now people are being ‘teased’ out of their homes.
“For now, the industry is still predicting that the subprime problem and foreclosures will continue to rise before they retreat.
"We're starting to see the tip of the iceberg," said Tingting Zhang, president of The TerraCotta Group, a Redondo Beach real-estate-investment company funded by private investors. "It will be bitter; it doesn't matter what the government does. People are still going to be going through pain."” Something very similar to this is happening in Denmark, too.

[Gord_in_Toronto]

Not sure what the "subprime" crisis might be in other countries.

Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

Tokie

Different Universe from ours?

[CriticalThanking]

[snip]Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

That is an interesting idea - that most borrowers' ability to make the next house payment is tied to which party is currently in office. For subprime adjustable rate mortgages (ARMs), the primary self-reported cause (>90%) of initial delinquency is interruption of income, not the rise in the interest rate. Are you saying that people's incomes are being interrupted because of the Republican party? ;-)

I need to study the data a bit more to be able to quantify the reasons on other loan types, but income interruption is still overall number one.

Ok, I really do understand which point you were trying to make. But please be specific. Is it your contention that the numbers/rates of people delinquent on their loans, or being foreclosed upon, or unable to get a loan due to credit tightening are mundane occurrences? I am intentionally separating the issue of decline in home value across a large number of metropolitan areas. Do you have data that shows any of these items are mundane, common occurrences?

CT

[balrog666]

Not sure what the "subprime" crisis might be in other countries.

Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

Tokie


Uh, no. The big problem is that all those bundled subprime ODC's have no market value. They're not worthless, it's just that no one can place a meaningful value on them, no one wants to buy them, and no one can sell them at anything approaching what they paid for them. So they've just become illiquid (non-readily marketable).

Thus, the balance sheets of far too many financial companies are in breach of their minimum capital asset requirements and are technically insolvent.

Furthermore, new banking rules are going into effect that require that they report these securities at market value, regardless of how they are performing cash flow wise. And that will squeeze their balance sheets even further.

And now where do the major financial companies get the cash (or readily marketable securities) to prop up their balance sheets other than by selling off significant ownership shares to the cash rich? So look for the Saudis, Abu Dhabi, Kuwait, the Sultan of Brunei, the Chinese and other Sovereign funds, et al. to pick up a big share in, or to buy outright, a great many US and European finanical firms over the next year.

[Tokenconservative]

Uh, no. The big problem is that all those bundled subprime ODC's have no market value. They're not worthless, it's just that no one can place a meaningful value on them, no one wants to buy them, and no one can sell them at anything approaching what they paid for them. So they've just become illiquid (non-readily marketable).

Thus, the balance sheets of far too many financial companies are in breach of their minimum capital asset requirements and are technically insolvent.

Furthermore, new banking rules are going into effect that require that they report these securities at market value, regardless of how they are performing cash flow wise. And that will squeeze their balance sheets even further.

And now where do the major financial companies get the cash (or readily marketable securities) to prop up their balance sheets other than by selling off significant ownership shares to the cash rich? So look for the Saudis, Abu Dhabi, Kuwait, the Sultan of Brunei, the Chinese and other Sovereign funds, et al. to pick up a big share in, or to buy outright, a great many US and European finanical firms over the next year.

Hmm...yeah, I wondered what was going to happen with these things when the bundles could not be resold.

It's a problem, but nothing as big as the media and the libs are making it out to be in the runup to getting Queen Hilary crowned.

It's nowhere near as bad as things were in the 80s, though I will say that the selling and reselling of these mortgages seems to be something that is a much bigger part of the whole these days.

Tokie

[Tokenconservative]

That is an interesting idea - that most borrowers' ability to make the next house payment is tied to which party is currently in office. For subprime adjustable rate mortgages (ARMs), the primary self-reported cause (>90%) of initial delinquency is interruption of income, not the rise in the interest rate. Are you saying that people's incomes are being interrupted because of the Republican party? ;-)

I need to study the data a bit more to be able to quantify the reasons on other loan types, but income interruption is still overall number one.

Ok, I really do understand which point you were trying to make. But please be specific. Is it your contention that the numbers/rates of people delinquent on their loans, or being foreclosed upon, or unable to get a loan due to credit tightening are mundane occurrences? I am intentionally separating the issue of decline in home value across a large number of metropolitan areas. Do you have data that shows any of these items are mundane, common occurrences?

CT

I guess I wasn't being clear, or were assuming from your other posts you were a bit more sophisticated in your understanding of these things.

Let me draw a picture: the media in America is, by and large, left-advocacy (they stopped being simply left-biased some time ago, and are now actively working against the correct side of things while trying, very actively, to influence elections by the way in which they report things). They are extracting a pound of lies from an ounce of truth in the "foreclosure crisis."

In actual fact, currently, nationwide 90% of all mortgages are being made on time and only 10% fall into the "at risk" category, anyway. Of that 10% something like less than 1% are identifiably mortgages to people who will have a hard time making their payment when it caps. Now, if there were say, 26 houses in America, these numbers might be a bit scary. But there are more houses than that here.

The 90% you reference is 90% of that less than 1%...which for some reason you left out of your figures. Moreover, only something on the level of 4-5% of ALL houses in America are included in the "crisis." This is expected to rise to a MAXIMUM of 8% (more likely somewhere around 6%) in mid 2008. Again, hardly what anyone reasonable would call a "crisis." It takes more cars than that, having the same problem, in a manufacturing run to trigger a recall. And the foreclosure RATE in 1999 was something around 4%, anyway.

Also, since unemployment is running at a frightening 4% (nearly time to open the soup and brealines!) any reasonable thinker can figure out that "employment disruption," as a cause for foreclosure continues to be simply part of a market correction as anyone who, in this economy, cannot replace a lost job in a matter of weeks, at most, and who does not have at least a month of mortgage payment $$ available in the bank or on credit cards...whatever, is clearly not someone who should be a homeowner in the first place. Just as those "day traders" who all lost their shirts when the .com bubble burst, shouldn't have been playing that game.

Repeat after me: market correction.

Regardles of all the sob stories, it is diminishingly rare and most of the time when foreclosure occurs it's because someone got in over his/her head.

No, I'm not saying that. Incomes WILL be severely disrupted if Hilary is elected and we are not smart enough to keep enough Rs in Congress to cripple her presidency. That's what happens when taxes are raised, which she will do and which a socialist congress will rubber-stamp.

Do you have any data that show that credit tightening has never occured before or that no one has ever lost his or her home to foreclosure in the past?

Tokie

[Tokenconservative]

Different Universe from ours?

No, just a different planet.

Earth.

We have bigger brains than people from planet Canada.

Not to brag, of course. Moose have small brains.

Tokie.

[Tokenconservative]

Well, it’s certainly more than “a fairly mundane and low-level market correction” to the millions of people who risk losing their homes: http://www.democracynow.org/2007/4/4/subprime_lending_crisis_millions_of_families
… and now people are being ‘teased’ out of their homes.
Something very similar to this is happening in Denmark, too.

No, it's just what I said it was, and how Ma and Pa Kettle feel about it simply does not matter.

Next time, they should more carefully weigh their options such as: can we really afford the upkeep on a home (I imagine the government pays for that in Denmark) and will we be able to meet the mortgage when it caps out at more than twice what we are paying now?

ARMS, Option-ARMS and HELOCs are wonderful instruments for people sophisticated enough in these things to know how to use them.

Ma and Pa Kettle are not that sophisticated, and will pay the price. That's not a good thing. It's not a bad thing. It's just a thing.

Foreclosure happens all the time. Currently, in the US our foreclosure RATE is about what it was in 1999....nobody was screaming about it then...but then, 1999 was not (even protracted as this one is) an election year.

I am not sure what "teased out of their homes" means.

In case you don't know, I rarely access the links of people I believe I can trust and that means I NEVER access links provided by shrieking libs.

Besides, I'm sorta old school. I believe that if YOU are going to make an argument, you should not post a buncha links and shriek at me, "There! No go read all that and arrive at my conclusion!" No, I'd much rather YOU read it, analyzed it (if you are able) then synopsized it in one way or another for my edification, with cites etc. as you feel the need.

Hope you'll forgive me, that's just the kinda hairpin I am.

Tokie

[Gord_in_Toronto]

No, just a different planet.

Earth.

We have bigger brains than people from planet Canada.

Not to brag, of course. Moose have small brains.

Tokie.

Gee. I just searched on Google for <bloomberg banks mortgage +december +2007> and got close to 200,000 hits. The majority seem to show that the rest of this planet (including the USA) sees a major problem with the perceived value of US mortages and that this is causing major financial probelms for all of us.

You don't have to apologize for moose brains -- they are delicious!

[a_unique_person]

Now they are mentioning a trillion dollars being at risk. Add that on to the cost of the war in Iraq, and it could all add up. As someone once said "A trillion here, a trillion there, pretty soon you are talking about serious money".

http://blogs.theaustralian.news.com.au/davidnason/index.php/theaustralian/comments/credit_loss_could_hit_us1trillion



THE US economy could be heading into its blackest year since the Great Depression as estimates of losses from the housing slump and sub-prime mortgage implosion reach unprecedented levels.

The latest bank estimate of $US700 billion in losses made this week by Rob McAdie, the UK-based head of credit at Barclays Capital, is $US300 billion more than a headline-grabbing Goldman Sachs estimate that jolted US markets just last month.
And it is light years from the $US50-100 billion in losses predicted by US Federal Reserve chairman Ben Bernanke to Congress in July. Expressed another way, the International Monetary Fund and World Bank say only 15 countries have a GDP higher than $US700 billion. Australia was 15th on both lists.
But even estimates of a $US700 billion sub-prime bloodbath may be conservative, with respected finance and economic blog sites like Calculated Risk predicting losses as high as $US1 trillion. The implications for global credit markets of losses of this magnitude would be horrendous, forcing banks and other institutions to slash lending by several trillion dollars.
Combined with the rising cost of oil, the US would be plunged into a recession, the severity of which would depend largely on the policy responses taken by the Fed and the White House to restore confidence and liquidity.
Writing in American Banker last week, Alfred DelliBovi, president and chief executive of the Federal Home Loan Bank of New York and a former deputy secretary of the US Department of Housing and Urban Development, said the lessons of the Great Depression could help avert disaster.

[Gord_in_Toronto]

Now they are mentioning a trillion dollars being at risk. Add that on to the cost of the war in Iraq, and it could all add up. As someone once said "A trillion here, a trillion there, pretty soon you are talking about serious money".

http://blogs.theaustralian.news.com.au/davidnason/index.php/theaustralian/comments/credit_loss_could_hit_us1trillion

No need to worry. Tokie will be along in a minute to tell you that it's "just a minor market correction".

[Corsair 115]

No need to worry. Tokie will be along in a minute to tell you that it's "just a minor market correction".Or he'll lay the blame for all the problems on liberals/the left/anti-Americanism.

[JonnyFive]

Hmm...yeah, I wondered what was going to happen with these things when the bundles could not be resold.

It's a problem, but nothing as big as the media and the libs are making it out to be in the runup to getting Queen Hilary crowned.

It's nowhere near as bad as things were in the 80s, though I will say that the selling and reselling of these mortgages seems to be something that is a much bigger part of the whole these days.

The other central issue here is the effect that all this will have on credit issuance in general. The issues of credit over-extension in the subprime market are going to impact the outlook of the financial institutions when it comes to underwriting credit in general, and the likely result is that they will move to a hard underwriting stance and it will be generally more difficult to obtain credit.

That is the second part of how this situation could cause an economic slowdown. I wouldn't say "crisis," but I certainly wouldn't say "minor market correction, nothing to see here" either, and to do so is simply to bury one's head in the sand. Ultimately, that is no better than the hysterics you accuse the "left advocacy" media of displaying.

[Tokenconservative]

The other central issue here is the effect that all this will have on credit issuance in general. The issues of credit over-extension in the subprime market are going to impact the outlook of the financial institutions when it comes to underwriting credit in general, and the likely result is that they will move to a hard underwriting stance and it will be generally more difficult to obtain credit.

That is the second part of how this situation could cause an economic slowdown. I wouldn't say "crisis," but I certainly wouldn't say "minor market correction, nothing to see here" either, and to do so is simply to bury one's head in the sand. Ultimately, that is no better than the hysterics you accuse the "left advocacy" media of displaying.

Nothing wrong with tightening up credit extension. Besides, that happens periodically and seems never to cause the economy to collapse.

But the left and their 5th column, the "news" media are shrieking "CRISIS!!!" regardless of whether it actually is (it isn't). And yes, depending upon how Congress or even some key states react and how their own leftist politicians' force them to react to the "crisis," we could indeed see this snowball in to something much, much worse than the minor market corretion (sorry, but this currently impacts MAYBE 4% of all mortgages in the country and will reach a MAXIMUM of 8%--very unlikely--at its peak in the middle of next year, so that make it minor) that it currently is.

And of course, that's he hope of the left, that it will snowball into something that severely impacts the entire econmy, slows it down at minimum or causes a crash--best scenario in the view of the left--to help them regain and keep power at the national level.

Tokie

[Tokenconservative]

Gee. I just searched on Google for <bloomberg banks mortgage +december +2007> and got close to 200,000 hits. The majority seem to show that the rest of this planet (including the USA) sees a major problem with the perceived value of US mortages and that this is causing major financial probelms for all of us.

You don't have to apologize for moose brains -- they are delicious!
Not surprising. Perception is 99% of reality and the perception, pounded into everybody's head by the left-advocacy media is that our econmy is collapsing and that the mortgage "crisis" is just evidence for that.

Of course, lefties like you, willing to slice off your own nose to spite MY face, are happy to help the US economy slide in order to get Hitlery or Osama into office.

That's all that's important to you.

Tokie

[JonnyFive]

Nothing wrong with tightening up credit extension. Besides, that happens periodically and seems never to cause the economy to collapse.

I agree with you on this, but it is possible to a reduction in credit to cause economic harm. Again, I don't think it's a crisis, but I don't think we should just be shrugging our shoulders and dimissing it as a minor correction either.

But the left and their 5th column, the "news" media are shrieking "CRISIS!!!" regardless of whether it actually is (it isn't). And yes, depending upon how Congress or even some key states react and how their own leftist politicians' force them to react to the "crisis," we could indeed see this snowball in to something much, much worse than the minor market corretion (sorry, but this currently impacts MAYBE 4% of all mortgages in the country and will reach a MAXIMUM of 8%--very unlikely--at its peak in the middle of next year, so that make it minor) that it currently is.

The core issue as far as the market is concerned isn't the mortgages directly effected, it's the resulting impact on the overall credit market and the securities markets that are backed up by those mortgages that are effected.

For the love of Ed, please take the rants about the leftists and the news media to politics. "What is the impact of the subprime situation" and "are the Democrats using the subprime situation as a stepping stone for political gain" are two separate topics.

And of course, that's he hope of the left, that it will snowball into something that severely impacts the entire econmy, slows it down at minimum or causes a crash--best scenario in the view of the left--to help them regain and keep power at the national level.

Really? Is that really the intention of "the left?" Like how the goal of "the right" is to set up a perpetual "war on terror" based on fear and lies so they can stay in power forever and rape Iraq for its sweet, sweet oil?

Wait, those are both ridiculously over-broad statements about ridiculously over-broad political meta groups. Take it over to politics.

[Gord_in_Toronto]

Not surprising. Perception is 99% of reality and the perception, pounded into everybody's head by the left-advocacy media is that our econmy is collapsing and that the mortgage "crisis" is just evidence for that.

Of course, lefties like you, willing to slice off your own nose to spite MY face, are happy to help the US economy slide in order to get Hitlery or Osama into office.

That's all that's important to you.

Tokie

Ok. So it's a completely different Space-Time Continuum you live in? :boggled:

[Tokenconservative]

I agree with you on this, but it is possible to a reduction in credit to cause economic harm. Again, I don't think it's a crisis, but I don't think we should just be shrugging our shoulders and dimissing it as a minor correction either.

The core issue as far as the market is concerned isn't the mortgages directly effected, it's the resulting impact on the overall credit market and the securities markets that are backed up by those mortgages that are effected.

For the love of Ed, please take the rants about the leftists and the news media to politics. "What is the impact of the subprime situation" and "are the Democrats using the subprime situation as a stepping stone for political gain" are two separate topics.



Really? Is that really the intention of "the left?" Like how the goal of "the right" is to set up a perpetual "war on terror" based on fear and lies so they can stay in power forever and rape Iraq for its sweet, sweet oil?

Wait, those are both ridiculously over-broad statements about ridiculously over-broad political meta groups. Take it over to politics.

You are dragging all sorts of other things into "the issue." The "issue" is the foreclosure "crises." While yes, the tightening of credit requirements is directly related to that, just about nothing else is. That's not why building (SFR residential only...commmercial and apartment building starts are up) starts are down, for example.

What SHOULD we "do" about a crisis that isn't if not shrug our shoulders and move on? This "crisis" is directly impacting almost no one. A few lenders have gone under because this was the last straw on an already weak camel's back. So? That too is a minor market correction. No banks have failed. The nations largest mortgage lenders are strong.

The biggest inpact is on the hedge funds. A few multimillionaire investors are going to lose their shorts. I'm not crying for them, are you? If so, why? Will this have ripple effects across the rest of the econmy? Some, sure...so will my buying a $10.00 tshirt as opposed to a $12.00 or $8.00 one.

So what? Does that mean the economy is in peril? If so, why are none of the other economic indicators: energy, transportation, industrial production, other parts of finance, and even commercial construction showing any signs of it?

You apparently don't understand (or don't want to) how our media, largely controlled by leftist ideologues is fueling this "crisis." We've been told here, in the US, since 2004, that the economy is a basket case, and that shrill, but false warning, has only ratcheted up in the past year and a half. This is why the "crisis" IS a "crisis." Because the media, hoping to help put a socialist in the White House and fill more seats in the Senate with socialists says it is.

I'm sorry if you don't understand how this impacts the American economy and how you really cannot discuss the "crisis" without discussing the primary reason it is being identified as such when in fact, it's nothing of the sort.

So no, for the love of Ed, I will not stop talking about the attempt by leftists, using their handmaidens in the left-advocacy media to scuttle the US economy ahead of the upcoming eleciton for politicaly expediency (when times are tough, we tend to elect Dems--makes no sense, I know) when that is the sole reason the "crisis" IS a "crisis."

Tokie

[Tokenconservative]

P.s.: The very title of this thread tells us how effectively has the left-advocacy media managed to inclucate us with the entirely false notion that this is a "crisis" (or "disaster") and that this is part of the larger "total economic collapse" we are facing according to those same leftists, so desperate to see a socialist running/ruining the US.

By the way: this will be a self-fullfilling prophecy if a socialist is elected to the White House (very likely) and if we do not manage to keep the Senate from having a clear Dem majority (unlikely). We are in for at least 4 and possibly 8 very tough years economically, socially and around the world.

Tokie

[a_unique_person]

It's a disaster, it just is an open question how much of a disaster it is. It could be a small storm in a financial backwater, it could be leading the US to a recession.

[Tokenconservative]

It's a disaster, it just is an open question how much of a disaster it is. It could be a small storm in a financial backwater, it could be leading the US to a recession.

The hope of the left is that is exactly what it will do, and they hope, using their monstershouting, fearmongering media. to turn this relatively minor market correction into a "disaster of unparalled proportions!!!" that will sap American consumer confidence which WILL accomplish their goal of reversing the growth of the economy ahead of the election so they can gain and retain power.

It's not much of an open question. The foreclosure raten in 1999 was higher than it is today, and yet then, for some reason, it was not a "disaster." Today it is?

Why?

Tokie

[a_unique_person]

http://business.theage.com.au/huge-jump-in-us-housing-defaults/20080101-1jrr.html



DEFAULTS on privately insured US mortgages increased 35% in November to a record, adding to evidence the US housing slump is worsening.
The number of insured borrowers falling more than 60 days late on payments jumped to 61,033 in November, from 45,325 in November 2006, according to data from members of the Washington-based Mortgage Insurance Companies of America. The missed payments, often a prelude to foreclosure, were a 2.9% increase on October.
"This is another data point that suggests that the mortgage insurers are in for a tough slog for 2008," said David Havens, a credit analyst at UBS in Stamford, Connecticut.
"Continued deterioration is likely to spur higher claims. And higher claims activity may result in some companies needing to raise money."
Home prices fell 6.1% in 20 US cities in October, according to S&P/Case-Shiller. Mortgage insurance compensates lenders for losses on bad loans as falling home prices make it harder for borrowers to refinance.
MGIC Investment Corp, the largest US mortgage insurer, and PMI Group, the second-largest, reported losses in the July to September period, their first unprofitable quarter as public companies.

[Tokenconservative]

http://business.theage.com.au/huge-jump-in-us-housing-defaults/20080101-1jrr.html

I'm sorry...does this talk anywhere about the important number, the foreclosure RATE?

If not, why not?

Oh...that's right, it's an election year and 35%!!!!!! is far more likely to get people to vote D than is 4%.

Tokie

[JonnyFive]

You are dragging all sorts of other things into "the issue." The "issue" is the foreclosure "crises." While yes, the tightening of credit requirements is directly related to that, just about nothing else is. That's not why building (SFR residential only...commmercial and apartment building starts are up) starts are down, for example.

Actually, this thread is about the subprime lending issue generally, not the foreclosures specifically.

I know a_unique_person's OP was pretty broad, but it didn't say anything specific to the possibility of foreclosures or their potential impact on the real estate market.

I've no idea why you just brought new construction (or anything else) into this. I was talking about two things in connection to the subprime issue: its impact on the mortgage-backed securities market (which mortgage lending is obviously directly connected to) and its potential impact on the credit market in general.

The only other thing in the post you quoted was an appeal for you to stop taking economic issues and turning them into rants about the leftists.

What SHOULD we "do" about a crisis that isn't if not shrug our shoulders and move on? This "crisis" is directly impacting almost no one. A few lenders have gone under because this was the last straw on an already weak camel's back. So? That too is a minor market correction. No banks have failed. The nations largest mortgage lenders are strong.

Well, "we" (meaning: the Fed) could probably stand to slightly tigthen up lending regulations, which they are doing, to prevent the over-extension of credit from reaching a harmful point. Also, "we" (meaning: the credit issuers) could move to a harder underwriting stance, which they almost certainly have.

Whether or not the issue with subprimes effects people other than those in the subprime lending market seeking mortgages will largely depend on how the impact on mortgage-backed securities and overall lender/investor confidence spills over into other market segments. It is possible that this will cause a broader unwillingness to restrict credit, which could slow the economy down, potentially a lot.

I haven't heard any talk of downgrading the credit ratings of any major lenders over this, so that's not a road we need to bother traveling down.

What "we" (meaning: the general public) can do is quite limited. We can limit our investments in that market sector, particularly in MB securities that were backed with subprime mortgages. It might also be a good time to not go out and get a variable rate mortgage.

The biggest inpact is on the hedge funds. A few multimillionaire investors are going to lose their shorts. I'm not crying for them, are you? If so, why? Will this have ripple effects across the rest of the econmy? Some, sure...so will my buying a $10.00 tshirt as opposed to a $12.00 or $8.00 one.

I'm not really sure why you believe that hedge funds will be primarily impacted by this. Certainly, some of them invest in MB securities, but the range of investments is quite diverse.

I'm sure the smarter managers would have been following the market trends, and would have started to move the securities if they saw a major downturn as a likelihood.

So what? Does that mean the economy is in peril? If so, why are none of the other economic indicators: energy, transportation, industrial production, other parts of finance, and even commercial construction showing any signs of it?

Who's saying the economy is in peril? Certainly not me. If you want to talk about this aspect of the issue, take it to someone else and leave me out of it.

I don't think this is a critical issue to the economy, but I do believe it is an important one.

You apparently don't understand (or don't want to) how our media, largely controlled by leftist ideologues is fueling this "crisis." We've been told here, in the US, since 2004, that the economy is a basket case, and that shrill, but false warning, has only ratcheted up in the past year and a half. This is why the "crisis" IS a "crisis." Because the media, hoping to help put a socialist in the White House and fill more seats in the Senate with socialists says it is.

You see "the media" through a thick filter of bias. I've heard all manner of reporting on these issues, some positive and some negative. I have seen talk of the "foreclosure crisis," but nothing approaching the hysteria you seem to attribute to the "leftist" media.

I'm sorry if you don't understand how this impacts the American economy and how you really cannot discuss the "crisis" without discussing the primary reason it is being identified as such when in fact, it's nothing of the sort.

Actually, I just wanted to talk about the actual, underlying economic phenomenon being identified somewhat inaccurately as a "crisis" by some people.

I could care less how you think "the left" spins the issue. Similarly, I don't really give a rip if you or "the right" or whoever spins it as a "minor market correction." I'm more interested in the actual economic and financial issues.

So no, for the love of Ed, I will not stop talking about the attempt by leftists, using their handmaidens in the left-advocacy media to scuttle the US economy ahead of the upcoming eleciton for politicaly expediency (when times are tough, we tend to elect Dems--makes no sense, I know) when that is the sole reason the "crisis" IS a "crisis."

If you want to continue in this line of discussion, I would kindly ask you to provide some factual support for the follow assertions you have explicitly or implicitly made:

-That the media is a "handmaiden" to the "leftists."

-That the media is attempting to deliberately scuttle the US economy.

-That political elections tend to swing democratic when the economy is in trouble, or perceived as being in trouble.

While you're at it, some correlation between the political party in power and the overall economic situation would be swell. You can use whatever economic indicator you feel is appropriate.

You see, you keep saying that I don't think politics has anything to do with the economy (and I'm sure that's my fault for not being clear in my posts), but that's not entirely true. I don't believe that political party, per se, has anything to do with the economy. I do believe that it is possible to make economic decisions based on political beliefs, and those things should certainly be discussed if they present a relevant concern.

However, you don't really seem to like to actually show evidence for your broad statements about leftists trying to manipulate the economy. If only you could do that, rather than simply expecting me to take you on your word.

[Zalbik]

Of course, lefties like you, willing to slice off your own nose to spite MY face, are happy to help the US economy slide in order to get Hitlery or Osama into office.

That's all that's important to you.

Tokie

Canadians can help get Hilary or Osama into office?!?! :jaw-dropp

Wow, I hadn't realized that our forum postings had such wide-reaching effects!

On second thought, I hope the current idiot gets re-elected. I like having the Canadian dollar at par :D.

[Tokenconservative]

Canadians can help get Hilary or Osama into office?!?! :jaw-dropp

Wow, I hadn't realized that our forum postings had such wide-reaching effects!

On second thought, I hope the current idiot gets re-elected. I like having the Canadian dollar at par :D.

Of course you can. Any MoveOnPAC operative can.

You spread enough doom and gloom about the US economy, and many Americans start to believe it, and it's a self-fullfilling prophecy...yes, good for Hosers, bad for people.

Tokie

[Zalbik]

You spread enough doom and gloom about the US economy, and many Americans start to believe it, and it's a self-fullfilling prophecy...yes, good for Hosers, bad for people.

Tokie

Great!

BTW...did you hear about the sub-prime mortgage crisis?!?! The American economy is collapsing!!!!!! :eek:

[Tokenconservative]

Great!

BTW...did you hear about the sub-prime mortgage crisis?!?! The American economy is collapsing!!!!!! :eek:

Yes, I heard that!

In 1972.

Again in 76 or so...in fact, throughout the next 12 years or so after that...

Din't hear about it in 1999 when the foreclosure rate was higher than it is now....

But I shorely is hearin' bout it now!!

Tokie

[CriticalThanking]

I guess I wasn't being clear, or were assuming from your other posts you were a bit more sophisticated in your understanding of these things.
I'd better tell my boss to reassign me. Analysing this stuff is what I do for a living. That is not an appeal to authority, as I must back whatever claims I make.

Let me draw a picture: the media in America is, by and large, left-advocacy (they stopped being simply left-biased some time ago, and are now actively working against the correct side of things while trying, very actively, to influence elections by the way in which they report things). They are extracting a pound of lies from an ounce of truth in the "foreclosure crisis."
And there is a major problem. Rather than deal in facts, you seem to prefer to hand-wave vague statements without backing them up and point to the media regardless of topic. Feel free to continue painting your self-portrait. No - I will resist the urge to link that to the image of a certain child's entertainer with floppy shoes and a red nose. As JonnyFive and others continue to point out, any perceived political affiliation of the media is irrelevant to the numbers the mortgage lenders are seeing. Reporting inaccuracies - yes, they are a nuisance to all. Sensationalism of poorly researched case studies presented, yes. Perceived bias of Rep vs Dem reporters: not to my company.

In actual fact, currently, nationwide 90% of all mortgages are being made on time and only 10% fall into the "at risk" category, anyway. Of that 10% something like less than 1% are identifiably mortgages to people who will have a hard time making their payment when it caps. Now, if there were say, 26 houses in America, these numbers might be a bit scary. But there are more houses than that here.

Yay! An attempt at a fact! Would that the "90% [..] on time" were directly related to the OP, which specifically mentioned subprime. The companies are required to report their delinquency statuses. Please show the source, whether by MBA or OTS calculation methods, for a claim that subprime delinquency is 10% or less. Or were you simply moving the goalposts?

Also note that when you are talking about numbers this large, movements on the order of basis points (for the lurkers, a basis point is one hundredth of a percentage point) are considered significant. For trillion dollar portfolios, a percentage point is serious money.

[QUOTE]
The 90% you reference is 90% of that less than 1%...which for some reason you left out of your figures.
No, I was quite specific (bolding mine):

For subprime adjustable rate mortgages (ARMs), the primary self-reported cause (>90%) of initial delinquency is interruption of income, not the rise in the interest rate.


Also, since unemployment is running at a frightening 4% (nearly time to open the soup and brealines!) any reasonable thinker can figure out that "employment disruption," as a cause for foreclosure continues to be simply part of a market correction as anyone who, in this economy, cannot replace a lost job in a matter of weeks, at most, and who does not have at least a month of mortgage payment $$ available in the bank or on credit cards...whatever, is clearly not someone who should be a homeowner in the first place. Just as those "day traders" who all lost their shirts when the .com bubble burst, shouldn't have been playing that game.
Bolding mine, silly attempt to frame the debate, yours. Histrionics about employment rates, yours. Ignoring of same, mine. Personally, I never considered attempts at home ownership a game. Whatever.


Regardles of all the sob stories, it is diminishingly rare and most of the time when foreclosure occurs it's because someone got in over his/her head.

[predictable, boring, rant against dems irrelevant to the OP deleted]

Wow. So on one hand you consider the rise in delinquency and foreclosure rates to be insufficient to be called a crisis, now your claim that it is diminishingly rare. Ok.



Do you have any data that show that credit tightening has never occured before or that no one has ever lost his or her home to foreclosure in the past?

Tokie
I never made such a silly claim - strawman. People do have interruptions of income - oh, wait. You claim that is diminishingly rare.

CT

[CriticalThanking]

You are dragging all sorts of other things into "the issue." The "issue" is the foreclosure "crises." While yes, the tightening of credit requirements is directly related to that, just about nothing else is.
JonnyFive's comments are immediately relevant to the topic, whether the OP, or your inability to discuss most topics without starting to talk about "liberal media."


What SHOULD we "do" about a crisis that isn't if not shrug our shoulders and move on? This "crisis" is directly impacting almost no one. A few lenders have gone under because this was the last straw on an already weak camel's back. So? That too is a minor market correction. No banks have failed. The nations largest mortgage lenders are strong.

A few lenders... right (http://cuberules.com/2008/01/11/bank-of-america-buys-countrywide/). From that link, some 150 companies have gone bankrupt from the problems. And in a miraculous coincidence, the same link talks about a company that seems to be rather large in the industry. Yep, almost no one is being directly impacted.

I applaud those who have the stomach to continue to try to drag Tokie back to facts. I find it too tiring.

Lies, damn lies, statistics, and Tokie's sharp left right turn to rants about liberal media. *sigh*

CT

ETA - but I do find him sigworthy.

[Tokenconservative]

JonnyFive's comments are immediately relevant to the topic, whether the OP, or your inability to discuss most topics without starting to talk about "liberal media."


A few lenders... right (http://cuberules.com/2008/01/11/bank-of-america-buys-countrywide/). From that link, some 150 companies have gone bankrupt from the problems. And in a miraculous coincidence, the same link talks about a company that seems to be rather large in the industry. Yep, almost no one is being directly impacted.

I applaud those who have the stomach to continue to try to drag Tokie back to facts. I find it too tiring.

Lies, damn lies, statistics, and Tokie's sharp left right turn to rants about liberal media. *sigh*

CT

ETA - but I do find him sigworthy.

It's always easier to dismiss someone as a CTer than to address the issues, sure.

How many tire shops went out of business last year? How many banks closed their doors? How many department store? Dentist's offices?

You speak about the closing of "over 150!!!" lenders as if it's something. How many went out of business the year before? In 1998? In 1962?

Companies go under all the time. Sometimes even big ones if they make big mistakes. Many lenders did make big mistakes, and now they are paying for it.

That's how the market works.

Your monstershouting about it doesn't change that. It's just typical leftist fearmongering.

It also does not change the fact that the vast, vast majority (in the 90% range) of mortgages on American homes are not at all involved in this "crisis." What's the tipping point, to you, for something to be called a "crisis"? Under 5% apparently.

So, if 5% of oh, novel writers in America "go under" in a particular year, that means it's a "crisis"? Or if 5% of grocery stores close their doors in a year...crisis?

Now, of course, "crisis" is a very subjective term, one which you set at a much, much, much lower percentage-rate than I would. Currently, the foreclosure rate is about what it was in 1998.

Was it a "crisis" in 1998, too? If so, why were there now shrieking "news" stories about the crisis, then?

Tokie

[Tokenconservative]

I'd better tell my boss to reassign me. Analysing this stuff is what I do for a living. That is not an appeal to authority, as I must back whatever claims I make.

And there is a major problem. Rather than deal in facts, you seem to prefer to hand-wave vague statements without backing them up and point to the media regardless of topic. Feel free to continue painting your self-portrait. No - I will resist the urge to link that to the image of a certain child's entertainer with floppy shoes and a red nose. As JonnyFive and others continue to point out, any perceived political affiliation of the media is irrelevant to the numbers the mortgage lenders are seeing. Reporting inaccuracies - yes, they are a nuisance to all. Sensationalism of poorly researched case studies presented, yes. Perceived bias of Rep vs Dem reporters: not to my company.

[QUOTE]In actual fact, currently, nationwide 90% of all mortgages are being made on time and only 10% fall into the "at risk" category, anyway. Of that 10% something like less than 1% are identifiably mortgages to people who will have a hard time making their payment when it caps. Now, if there were say, 26 houses in America, these numbers might be a bit scary. But there are more houses than that here.

Yay! An attempt at a fact! Would that the "90% [..] on time" were directly related to the OP, which specifically mentioned subprime. The companies are required to report their delinquency statuses. Please show the source, whether by MBA or OTS calculation methods, for a claim that subprime delinquency is 10% or less. Or were you simply moving the goalposts?

Also note that when you are talking about numbers this large, movements on the order of basis points (for the lurkers, a basis point is one hundredth of a percentage point) are considered significant. For trillion dollar portfolios, a percentage point is serious money.


No, I was quite specific (bolding mine):


Bolding mine, silly attempt to frame the debate, yours. Histrionics about employment rates, yours. Ignoring of same, mine. Personally, I never considered attempts at home ownership a game. Whatever.


Wow. So on one hand you consider the rise in delinquency and foreclosure rates to be insufficient to be called a crisis, now your claim that it is diminishingly rare. Ok.



I never made such a silly claim - strawman. People do have interruptions of income - oh, wait. You claim that is diminishingly rare.

CT

I haven't done close statistical analysis for some time (used to to it regarding online ventures), but I do work in the industry, and I have to keep my nose (at least locally) pretty close to the ground. I live in one of those "crisis!!!" states where, because of very limited state regulation of mortgages, we are seeing a slightly eleveted number of foreclosures over states that more closely regulate (engage in nannyist interference in their children's lives) such things.

That's not an appeal to authority, it's just tellin' it like it is, baby!

I don't supply personal data online. If I provide the data you are looking for, I'll have half a dozen of my best "friends" in here attempting to identify me and do things to me, so no thanks.

The numbers are interesting, and you (if you do statistical analysis) should know that in this case the RATE is more important than the actual numbers, but that seems to be something you either don't know...or don't want to know.

The FACT of the matter is, the "news" media in America tends to slant it's news mildly (say, the Chicago Trib and ABC) to the left to extremely (say, NYTimes and CBS) to the left, using that bully-pulpit to influence the hearts and minds of Americans. As a leftist, you don't see this. As a leftist, I cannot convince you of this. Even the NYTimes own ombudsman, reacting to accusations of this, admitted after studying the issue that the NYTimes demonstrates a leftward bias in its "NEWS" reporting.

Nothing I can do can remove the blinders lag bolted to your skull in this matter, and so I am not even going to try. I won't try to convince you the sun rises in the east, either!

Indeed. When you are talking about numbers this large, a $trillion is a lot. But it's necessary to keep in mind that when you ARE talking about numbers this large, they round a $billion to the nearest 100.

Now, back to reality: the fact of the matter is, fewer homes currently are in/have gone into foreclosure this year than did in 1998. The "peak" of the "crisis" will occur sometime between oh, March and August of this year (that's fortunate timing, but no, I am not claiming some CT about that). The TOTAL number of mortgages "likely" to undergo foreclosure at this peak will not rise above 8% of the WHOLE (all home mortgages in the US).

Now, if YOUR home is being foreclosed upon yeah....that's a crisis. But as Stalin said, while one death may be a tragedy, a million is only a statistic. And in an economy like ours, an 8% foreclosure rate is but 2-4% above that of any other year, and that hardly warrants shrieking claims from the media that a "crisis" is envelpoing the land.

And IF (they are) the media is shrieking "crisis!!!" at every turn, and IF (they are) the media is, generally (please don't make me explain the difference between "news" and "commentary" when you come back and tell me that Limbaugh or Hannity are saying something else...) left-biase, asking "why are they reporting this this way?" is a fair question.

So...why?

Tokie