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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Thu Mar 15, 2007 12:49 am Post subject: Mortgage Foreclosures and Housing Bust to result in US Inter |
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Mortgage Foreclosures and Housing Bust to result in US Interest Rate Cuts
A preface is in order, to honor Sir Alan Greenspan. The housing bust and the mortgage finance debacle have his signature on them. So far he is still revered, for some odd reason, probably basic ignorance. Some called Clinton the “Teflon Man” which more deservedly belongs to Greenspan. Heck, they both earned the title; they can wear it with the ignominy it so justly is associated with.
GREENSPAN SIGNATURE - The current mess of mortgage defaults and foreclosures testifies to the venerable and highly acclaimed serial bubble inflation engineer Greenspan's leadership and counsel as destructive in high order. Alan must be shuddering and cringing at the extreme damage to banking balance sheets, the spate of lending institution collapses, and the contagion within banks. He urged millions of US homeowners to rush into adjustable rate mortgages, so as to reduce their monthly costs. Here is an actual quote from Greenspan, extolling the virtues (vultures) of innovative mortgages.
IT IS A SHOCKER, from a modern day John Law, who assisted in the transformation of the USEconomy into a giant hedge fund. Its foundation sits atop bubbles. Remember the two concepts Alan loves the most. That “innovation” is just another misleading term for broadened leverage to ramp a particular market. That “productivity” refers to more computing power for program stock & bond & derivatives trading (to earn fees), to displace workers (ending employer labor costs & fringe benefits) in the age of the great financial engineering miracle. Or is it a miraculous destruction? Would Sir Alan recall his words? Would he be proud of them? Methinks no and no. Why was he knighted by the Queen? Could it be because he helped bring down the US challenger to Old Europe? The lost US manufacturing base is a direct consequence of chronic inflation topped off by Greenspan policies. The housing bubble is one of Greenspan's more direct accomplishments. Decide for yourself.
“Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants… With these advances in technology, lenders have taken advantage of credit scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers… Where once more marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending,… fostering constructive innovation that is both responsive to market demand and beneficial to consumers.”-- Alan Greenspan, April 2005
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