Next shoe to drop?

Here in NC there's a constant barrage of advertising for student loans. It's tapered off in the last few months, but I'm not ready to conclude the trend has reversed. The pitches are often rather shocking: smiling youngsters holding up a $20K check to the camera, like an excited lottery winner, announcing they were headed to Best Buy or the like to buy a new PC (and, wink wink, an MP3 player and a game console and, oh yeah, maybe some textbooks and tuition and groceries). Billboards on the highway, flyers in the mailbox, the pitch is relentless.

http://news.enquirer...30412/1090/EDIT

"Subprime mortgages are a small minority of mortgages, and only a minority of subprime borrowers are not making their payments. Casting this minority of a minority as victims of "predatory" lending fits the liberal narrative that most Americans are victims of a sinister elite or impersonal force, and are not competent to cope with life's complexities without government supervision." 2 percent of the total number of mortgages have gone bad. The real problem is that it's 8 percent of the total dollar volume of mortgages that have been impacted so far. When banks are leveraged as much as they are today, the second number is enough to push them over the cliff.

Edited by Data, 13 April 2008 - 09:18 AM.

"Subprime mortgages are a small minority of mortgages, and only a minority of subprime borrowers are not making their payments. Casting this minority of a minority as victims of "predatory" lending fits the liberal narrative that most Americans are victims of a sinister elite or impersonal force, and are not competent to cope with life's complexities without government supervision."

2 percent of the total number of mortgages have gone bad. The real problem is that it's 8 percent of the total dollar volume of mortgages that have been impacted so far. When banks are leveraged as much as they are today, the second number is enough to push them over the cliff.

That quote is totally correct except I think the person you quoted has a political bias to with the "liberal narrative" line. Even McCain has come to realize, even though it goes against his principals, he can talk the talk too as the numbers of those qualifying and the amounts are so small compared to the other area where the government is piling in your tax dollars...the investment banks.

The fact is, most of the damage to housing prices through these no money down loans were done by speculators and their defaulting has and will continue to decimate housing prices in many areas of the country. The only price area that will not be affect as much are the higher end homes where that kind of speculation was not done as much. Upper-middle, middle and lower priced homes will be affected. Still that isn't where the real monetary damage to the economy will be done. It comes. as you posted, out of the leveraging the investment banks did using mortgages as collateral. It doesn't take much in terms of defaults to blow hundreds of billions of dollars in commerical paper collateralized with these junk loans out of the water when they have been leveraged 30 to 1. That is where the damage to ours and other economies will come ultimately come from. It's more difficult to understand. Joe and Jane Sixpack will not understand but, that is what will affect them the most.

The group that would fit the profile for government assistance to stay in their homes is miniscule. Those who did have fraud perpetrated against them or via steering or otherwise are miniscule in the big picture. Many will qualify to be involved in class action suits but, many of the lenders who did this are already out of business so, collecting will be a b*tch. Also, many, under a lawful circumstance, would never have qualified to begin with so, they will just go back to what they did before...renting. Their defaulting on their loan will not affect them all that much as they had lousy credit numbers to begin with.

My concern is that the municipalities will go after Countrywide, which is now mostly owned by Bank of America, and other lenders and that the Fed will then have to bail them out to "save the system" which is the punchline used to excuse their using our tax dollars to buy the Bear Stearns junk while JPM got the profitable stuff.

Bottom line. It's the investment banking games that are and will continue to decimate things, not the mortgage stuff itself. If it was just contained to the actual mortage defaults then, I would agree, it would be contained like the S&L crisis or the Long Term Capital situation or the dot com collapse but, thanks to the Wizards of Wall St. who, I might add are not personally liable for any of this and will still come our of it the multi-millionaires they were going into it no matter how much the "lose" in their option or bonuses invested, this thing is massive and will, like a plague spread and infiltrate all manner of our and the world's economy.

"Subprime mortgages are a small minority of mortgages, and only a minority of subprime borrowers are not making their payments. Casting this minority of a minority as victims of "predatory" lending fits the liberal narrative that most Americans are victims of a sinister elite or impersonal force, and are not competent to cope with life's complexities without government supervision."

2 percent of the total number of mortgages have gone bad. The real problem is that it's 8 percent of the total dollar volume of mortgages that have been impacted so far. When banks are leveraged as much as they are today, the second number is enough to push them over the cliff.

That quote is totally correct except I think the person you quoted has a political bias to with the "liberal narrative" line. Even McCain has come to realize, even though it goes against his principals, he can talk the talk too as the numbers of those qualifying and the amounts are so small compared to the other area where the government is piling in your tax dollars...the investment banks.

The fact is, most of the damage to housing prices through these no money down loans were done by speculators and their defaulting has and will continue to decimate housing prices in many areas of the country. The only price area that will not be affect as much are the higher end homes where that kind of speculation was not done as much. Upper-middle, middle and lower priced homes will be affected. Still that isn't where the real monetary damage to the economy will be done. It comes. as you posted, out of the leveraging the investment banks did using mortgages as collateral. It doesn't take much in terms of defaults to blow hundreds of billions of dollars in commerical paper collateralized with these junk loans out of the water when they have been leveraged 30 to 1. That is where the damage to ours and other economies will come ultimately come from. It's more difficult to understand. Joe and Jane Sixpack will not understand but, that is what will affect them the most.

The group that would fit the profile for government assistance to stay in their homes is miniscule. Those who did have fraud perpetrated against them or via steering or otherwise are miniscule in the big picture. Many will qualify to be involved in class action suits but, many of the lenders who did this are already out of business so, collecting will be a b*tch. Also, many, under a lawful circumstance, would never have qualified to begin with so, they will just go back to what they did before...renting. Their defaulting on their loan will not affect them all that much as they had lousy credit numbers to begin with.

My concern is that the municipalities will go after Countrywide, which is now mostly owned by Bank of America, and other lenders and that the Fed will then have to bail them out to "save the system" which is the punchline used to excuse their using our tax dollars to buy the Bear Stearns junk while JPM got the profitable stuff.

Bottom line. It's the investment banking games that are and will continue to decimate things, not the mortgage stuff itself. If it was just contained to the actual mortage defaults then, I would agree, it would be contained like the S&L crisis or the Long Term Capital situation or the dot com collapse but, thanks to the Wizards of Wall St. who, I might add are not personally liable for any of this and will still come our of it the multi-millionaires they were going into it no matter how much the "lose" in their option or bonuses invested, this thing is massive and will, like a plague spread and infiltrate all manner of our and the world's economy.

George Will has a political bias? What are you going to tell me next.....there's gambling in Casablanca?


> It's the investment banking games that are and will continue to decimate things, not the mortgage stuff itself.

Agreed! That's why I posted the article. Home loans, student loans....they aren't the problem. It's all the fun and games the Masters of the Universe play after the loans are made. That's the real problem.

Back in my old hometown of Cincinnati the largest school board there is considering refinancing its debt obligations on bonds it secured in a 2003 election. Just five years after the levy passed they again need to restructure their debt to squeeze out a tiny extra bit of operating funds now, with the promise that, in 10 years (!), the new deal will net out. What a deal, eh? Money for nothing.

The investment banker making the pitch is, drum roll please, the former COO of the district. And, his firm just contributed over 10% of the campaign budget to the most recent election campaign to raise operating funds for the district.

(I plan to move back to Cincinnati and start selling condoms.....with everyone in bed with each other, they'll need them.)


Bottom line, I agree. It's not just housing, it's student loans and loans for public infrastructure and God knows what else. All that leveraged stuff, all those people with hands in the pie sitting on both sides of the table almost at the same time. It's a mess.

Bottom line. It's the investment banking games that are and will continue to decimate things, not the mortgage stuff itself. If it was just contained to the actual mortage defaults then, I would agree, it would be contained like the S&L crisis or the Long Term Capital situation or the dot com collapse but, thanks to the Wizards of Wall St. who, I might add are not personally liable for any of this and will still come our of it the multi-millionaires they were going into it no matter how much the "lose" in their option or bonuses invested, this thing is massive and will, like a plague spread and infiltrate all manner of our and the world's economy.

Masters of the Universe often delude themselves about their importance to American economy. The whole mortgage and residential construction industries went out of business, which might have garnered a yawn, when the investment banking side of industry contracts or goes out of business, it won't even garner a yawn, in fact, it will be significant plus for the economy and the stock market as it could free up tens of billions of capital previously swindled by the operators out of common pools.

Edited by linrom1, 13 April 2008 - 11:34 AM.

I'm not so sure about that, linrom. I think it's liquidity and "off the books" velocity of money that will go away and that will likely cause any manner of "disintermediation". M

OEX: you just mentioned what might be the MOST IMPORTANT and least controllable part of this whole impending collapse. i am astonished that "V" (the velocity of money) is never discussed by the fed or by economists we hear on the news channel. paragraphs, monographs and books could and should be written about this elusive component of GDP. GDP = M x V ! you can have plenty of M around but without the V, nothing happens. and even a small decline in V has huge GDP consequences.