Alex_G

We Needed Government Aid Sooner

Richard,

I think you are forgetting what got us here in the first place. The largest housing bubble in our history, the use of inflated values to consume more than we make, and the extra debt taken on fuel the consumption.

Cash for Clunkers would not have saved the over-built auto industry.

$8,000 tax credit would not have made vastly overpriced houses affordable in the long run.

50% of economic growth from '02-'07 was fueled by the vapors of an asset bubble. It was time to pay the piper.

Fannie/Freddie Bailout 'Disastrous Fiasco'

The Hand:

I bought my first house in 1989 w/ 10% down, paid mortgage insurance, payment was 30% of take home, and gross income was 40% of loan amount. Fairly common, and if I went FHA, it would have been 3% down. My dad bought our families first house with even less than those ratios in 1969. Neither my dad or I had any other payments to speak of.

This current problem was not caused by down payment issues, but that the other ratios got out of wack and basically allowed people to speculate on houses, whether they meant to live in them or not.

Sound underwriting means determining whether someone can continue to pay for their obligation, not whether an investor will buy the loan. That is where all of this went wrong.

Fannie/Freddie Bailout 'Disastrous Fiasco'

Grace, you're smarter than this rant. The rich can pay an extra 100bps on their mortgages, the middle class have a more difficult time doing so. Fannie Golds were up 2 pts today and mortgage rates dropped 20 bps out of the gate. We should see an additional 80 or so over the next couple of months if all goes well. FNM and FRE should also be able to start accepting 10% down instead of 20%. This is the first step to stopping the freefall in housing.

As far as your quote from Jim Rogers goes, the guy has become a bit of a wacko lately, telling people he is all in china at the top of the market (down over 60% since this statement) and drivel such as you quoted.

This market has dictated that choices are being made for the lesser of 2 evils. The loss of tax revs in a protracted recession/consumer depression would be trillions, not billions. We will see more of this as more problems develop and the pros and cons are weighed.