rmendales

8 Comments

    • ON: Sat Sep 6th 15:02 PM
      Commented on:
      Rescuing Frannie
      All of this is rather ironic. Fannie Mae was established by Congress in 1938 to create a secondary mortgage market at a time when banks, which had been failing in droves during the Great Depression, were reluctant to make new loans; the objective of the new entity was to encourage banks and thrifts to make housing loans, knowing that there would be a market for them. In 1968, the original Fannie Mae was split into two entities--Ginnie Mae, which stayed a government entity, and today's Fannie Mae, which was privatized. The primary reason for privatization at that time was to take Fannie Mae's loan exposure off the government balance sheet, which was bashing against limits on the national debt because of the costs of the Vietnam War. What goes around...
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    • ON: Wed Aug 27th 13:46 PM
      Commented on:
      U.S. Household Debt: A Frightening Picture
      It shouldn't be all that surprising. Median real incomes have declined pretty steadily in the U.S. since 1973, and so people are trying to keep up both by working longer hours and by borrowing. This is particularly true in education, where the cost of educating your kids has gone up far faster than the overall CPI, and in health care, where we not only have the well-recognized problem of the uninsured, but an increasing problem with people who are uninsured. Empirical studies have shown that over the last 10 years or more, more than half of personal bankruptcy cases have been filed because of health care emergencies. The real crisis is not one of profligate borrowing, but of unavoidable expenses growing faster than median incomes.
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    • ON: Mon Jul 7th 13:47 PM
      Commented on:
      Ted Forstmann Thinks We're All Going to Hell
      Actually, he's right. Even if you didn't know about "subprime" mortgages, Fannie Mae and Freddie Mac were accepting mortgages that would have been considered "subprime" a few years before, representing loans to mortgagors with no equity at all. The FHA was insuring those loans, despite studies indicating that the default rate on loans with no owner equity is near 100%. It's now asking for comments on a change in its regulations that would restore a requirement that a mortgagor have some equity. The problem, therefore, is that many mortgages not considered subprime, and the securities using them for cash flow, are likely to default.
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    • ON: Sat Jun 7th 18:48 PM
      Commented on:
      22-Year-High Jump in Unemployment Hits Stocks and Dollar
      The US unemployment rate is actually understated, since it doesn't include "discouraged"... workers who are not actively seeking work, nor underemployed workers who are working part-time or for significantly less than earnings in previous jobs. It also fails to take in people who are working "off the books" to avoid taxes--a number that has probably risen given the current level of consumer distress. Given these factors, it is next to impossible to compute what the rate of unemployment really is.
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    • ON: Thu May 15th 16:39 PM
      Commented on:
      The Credit Card Time Bomb Is Ticking
      It's even worse than that. People are using plastic for things it wasn't meant for, and running up higher debt in doing so. A good example is higher education expenses. It's not just that people behind on their student loans are running up credit card debt. Beyond that, student loan availability has not kept up with the above-inflation rise in the costs of education, and students are using credit cards to make up part of the difference.
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    • ON: Sat May 3rd 14:18 PM
      Commented on:
      Considering Disaster
      I'm not sure the crisis is over yet. The problem is that there are other shoes left to drop. As Gordon noted above, auto receivables are vulnerable, and so, increasingly, is commercial real estate. What worries me is that the Fed may already have fired all the ammunition it has.
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    • ON: Fri May 2nd 10:29 AM
      Commented on:
      Thursday's Market 'Melt-Up'
      We have not yet seen a genuine bear market, but if recent moves by regulators do create an unwarranted euphoria in the markets, the next serious problem to emerge could create just that.
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    • ON: Fri Apr 18th 13:28 PM
      Commented on:
      Why New Oil Price Highs?
      It's not just the decline in the dollar that's at fault--it's partly fear that the dollar will begin to spiral downward out of control, which could happen if we continue to run huge deficits and to print money. If some producers begin quoting prices in euros, the result could be panic. It's the risk of this spiral that tends to drive commodity prices up.
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