Financial Ravings Go Mainstream

I handed in the first draft of Financial Armageddon in August 2006, when most people on Wall Street were, to paraphrase the former head of Citigroup (C), "still dancing" to the tune of bubbling financial markets.

Back then, I detailed my belief that one or both of the nation's largest mortgage lenders would eventually get into serious trouble, triggering shockwaves in global financial markets. No doubt my warnings sounded like the ravings of a lunatic.

Indeed, I can remember seeing all sorts of commentary from analysts, portfolio managers, and other so-called smart money types arguing that the selloff in the stocks of Fannie Mae (FNM) and Freddie Mac (FRE), which had followed in the wake of revelations of accounting and other problems at those two firms, was simply another buying opportunity.

Now, of course, things are different. That means old beliefs are falling by the wayside and formerly radical ideas are beginning to go mainstream. In "The Trillion-Dollar Mortgage Time Bomb," CNN.com's Chris Isidore reports on concerns that should have been actively discussed long before now.

Comments

[Tim Plaehn]

If CNN has discovered it, the crisis has definitely passed it's peak!

[Pent up demand]

Tim P,
Why do you have the idea that all trends develop so rapidly that CNN is incapable of reporting them?
One could just as easily argue that if CNN is giving air time to a "bust at FNMA" it is all but inevitable and they are just softening up the public for the eventual bailout.

[Tim Plaehn]

Let me see: The subprime mortgage crisis stared almost 9 months ago. Banks have taken huge write offs over the last 6 months. Thornburg Mortgage collapsed 2 months ago. We have all watched the meltdown in the financial system. FNM and FRE stock prices collapsed 6 6 months ago and they have taken huge write offs. I see a CNN story talking about a $trillion write down and I think we are probably close to a turning point in real estate and mortgages. I have little faith in any of the major media to predict the future. They have trouble reporting the recent past accurately.

[johngonole]

Tim P if we were talking fast moving cycles in stocks I would agree to you. However we are talking about a very slow moving housing price correction. Prices nationwide are only down about 3%. Here if Florida we still have a long way to go as far as price depreciation. Of course the house price deflation might not be so bad if we keep inflating the dollar. So I think we either get a consumer capital cruch recession/depression or we get Fed induce hyper inflation. Hyper inflation has a bit of an edge. The question is can the fed balance the two. So far we seem to be getting both the recession and the inflation all for the sake of saving house prices. This is all for a very few housing speculaters and new homeowners who purchased more then they could afford. So save house prices and the banks and kill everyone else.

I think we are in about the 3rd or 4th inning. Mainstream CNN is catching on yes but they aren't predicting the future yet. Its when they starting telling us that the mortgage crisis etc etc will never end and is here to stay. That might be a bottom call. But not this. Simply reporting is much different then a statement that something has become a permanent state.