12/07/2007

Credit crunch: It Ain't Over


Practicality says that sometimes you just have to hold your nose and just "do it." This apparently is what all the honchos in the government decided to do about the credit "crisis." They rescue the banks, hedge funds, and the big brokers and everything is solved. They say they are rescuing "tens of thousands" of homeowners (typical sub prime borrower at left). Who the fuck do these assholes think they are kidding? There ain't tens of thousands of "troubled" loans. There are 3/4 of a million of them, and at least a third of them were behind on their payments BEFORE their rates went up. Who's at fault? Why there's the FOMC, who took rates down to historic lows (low rates worked in Japan, didn't they?) and left the rates down there for a year; The bond rating agencies were in cahoots with underwriters--- This is so important it's unreal, but the rating agencies are the really big dogs on the block; and then there is our good old Federal Reserve (Genius Greenspan), in their capacity of over-seers of the Banking industry, failed to supervise the rampant issuance of irresponsible debt.

I only sympathize with the borrowers to the extent that the government should have been issuing public statements about the risks in order to deter everyone. As well as forbidding the practice of "sub prime" lending. There's more here and as usual The Big Picture has the best overview. Bloomberg has the best overall view, and boy are they hostile.

1 comment:

cubanbob said...

The government is entirely to blame. They charter the banks, regulate the banks and insure bank accounts. The OCC and FDIC are the responsible parties (and Congress for allowing the agencies to mis-regulate)for this mess. Who would invest their money in large banks that made stupid lending decisions if not for the account insurance. What sane regulatory agency would allow banks to make such blatantly stupid loans such as no income verification, no doc loans, 100% financing without other substantial assets to collateralize the loans. The list is long indeed and has no logical explanation. Another Ponzi scheme.
Fools who borrow beyond any possibility of being able to repay without selling and the bigger fools who made the loans. All of them blessed by the government.

We are all in a bad way. Don't bail them out and we risk a horrific financial catastrophe. Bail them out and we surely will embolden the fools again. Allow the government to brazenly void the contracts and the consequences will also be awful. Who in their right mind will risk investing when the rules can be changed at anytime arbitrarily? There are no good solutions only bad ones and worse.