Expat

Latest Bank Headache: Home Equity Loans

the average US consumer is apparently pretty stupid, at least about things like finance, savings, mortgages. The average US banker also seems pretty stupid, or is at least blinded by greed.

So who is to blame? Everyone (mostly). The idiots who took out HELOCS. The idiots who loaned out the HELOCs. The rah-rah morons on CNBC who cheered every rise in house prices and every increase in consumer spending. The Fed for facilitating and openly approving all this. The SEC for not regulating anything at all. The White House for letting it happen, profiting from it, and making sure Wall Street got its bonuses. The investment banks who packaged it all up and sold it out. The rating agencies who took the cash, closed their eyes and lied their asses off.

Who in power (media, banking, or politics) ever pointed out that rising consumer spending combined with falling real incomes is not a good thing? Who raised any alarms about the massive leverage and debt being created in financial markets? Who really wanted to moderate house prices on the way up? Who really wants to see them go down?

Everyone is guilty, but guess who will pay? Not Mozillo, not Prince, not Greenspan, not Bush, not Summers. Nope. Middle class and lower class America will pay, because they always do. Foreigners will pay because, well, we pretty much dislike them all anyway. A few rich guys will be served up as token sacrifices to the media, but most will get away with millions of dollars "earned" from the bubble.

There is no acceptable solution so look out for the most bizarre, perverted, and dangerous moves from Washington. Outright government purchases of mortgages and MBS's. Direct government funding of a few major banks or broker/dealers. War with Iran. A few more terrorist attacks in the US and abroad. Inflation at 15-30%. Euro at 2.00 USD. Yen at 75.