Ira Artman

Ginnie Mae Extension Risk - Well, Assume Me!

Yes, yes, and yes! When folks ask:

Who will pay for the mortgage crisis and the bailout?

the "easy" answer is "taxpayers" or "all of us."

Once you realize that we are probably [!] about to replay the S&L crisis of the 1980's:

1. balance sheet lending,
2. low rate mortgage assets,
3. funded by deposits that become too expensive once
rates move up as inflation reasserts itself,
4. due to ill-conceived programs that are funded with
loose money/printing press

It should be clear that

1. Before taxpayers are called again to pay for losses of balance sheet lenders (and are there any lenders these days, OTHER than balance sheet lenders - I think not)

2. the equity investors in balance sheet lenders may be wiped out as their low fixed rate mortgage asset heavy balance sheet can not be funded by shorter term deposits as the deposit rates reset upward.

But who remembers the 1980's?

Thanks for reading. - Ira