Experts warn that the boom in commercial real estate prices, fueled by cheap credit, is going sharply into reverse. Fitch had noted as early as April, and again in July that commercial real estate lenders were engaging in the same lax practices that led to grief with subprimes: 0% down, overly optimistic projections, deal terms […]
Read more...Michael Shedlock, of Mish’s Global Economic Trend Analysis, provides some uplifting charts and commentary that should quash any doubts that this housing cycle is worse than its predecessors: ….this housing cycle looks different than any I have seen. To this point, I have included two charts. I suggest studying them carefully. What you find is […]
Read more...Bloomberg tells us that the Fed and the Treasury made a joint statement today asking mortgage servicers to take a more proactive stance, identify borrowers in danger of gong into default, and offer loan modification. Tanta at Calculated Risk provided a link to the “ Interagency Statement on Loss Mitigation Strategies for Servicers of Residential […]
Read more...Ah, fall is upon us, and with it comes the spectacle of renewed discussion of what to do about the snowballing subprime/housing mess. Members of Congress will compete for air time to Bemoan the Situation, Search for the Guilty, and Throw Money at the Problem. Note there may occasionally be thoughtful analysis and sensible regulatory […]
Read more...Financial Times columnist Wolfgang Munchau, in “Prepare for the credit crisis to spread,” tells us that the credit crunch is likely to get worse, since credit problems will spread to credit card receivables and car loans, both of which are typically securitized, and collateralized loan obligations (read takeover debt) also look shaky. Munchau argues that […]
Read more...Apologies for the heavy reliance on the Financial Times today, but the pickings elsewhere are meager indeed. The FT has an interesting juxtaposition of stores on its website tonight. The lead story, from the Fed’s Jackson Hole conference, reports that Bundesbank President Axel Weber described the current credit crunch as resembling a bank run, but […]
Read more...Jim Hamilton should get an award for his remarks today at the Federal Reserve’s conference at Jackson Hole. His talk sought to step away from the issue du jour, namely what if anything, to do about housing, and look at larger structural and regulatory concerns. He brought up uncomfortable issues, in particular, the rising level […]
Read more...In a paper presented at the Fed’s Jackson Hole conference, Federal Reserve governor Frederic Mishkin urged central bankers to respond quickly and aggressively to large falls in housing prices, arguing that it was less effective to wait to see the impact of falling housing prices on the economy. Mishkin disputed the notion that consumer use […]
Read more...The Wall Street Journal, in “Bush Moves to Aid Homeowners,” reports that today the President will set forth a program to help stressed borrowers at risk of losing their homes. Main elements: Allowing the FHA to guarantee loans to borrowers who are at least 90 days behind on their mortgages but still living in their […]
Read more...Has Roubini gone to the Dark Side? Nouriel Roubini, normally the voice of prudence, makes a marked shift in his latest post, “Fiscal versus Monetary Solutions to the Subprime Crisis. ” He sympathizes with those like Bill Gross of Pimco who call on the federal government to rescue mortgage borrowers at risk of losing their […]
Read more...Today, in a comment at the Financial Times, “This is where Freddie and Fannie step in” (subscription required), Harvard’s Larry Summers argued that the subprime crisis highlights three questions. Most commentators focused on the one question he not only posed but answered, namely, what role government should play in aiding the flow of credit to […]
Read more...Recently, we’ve noticed a new theme among economics writers: Extreme Measures. Commentators have looked toward the end of the road we are on and fear it leads to a precipice. Hence the calls for radical course correction. Paul Krugman and Bill Gross of Pimco, each of whom proposed large scale rescues of homeowners at risk […]
Read more...We’ve noticed a new theme among economics writers: Extreme Measures. Commentators have suddenly looked into the abyss, either of the depth of the US subprime/housing problem or the progressing credit crunch that has already caused a seize up in the money markets, and are proposing radical courses of action. Our first sighting was Paul Krugman, […]
Read more...Bloomberg tells us that sales of £2 million ($4 million) homes and flats in London are on hold as buyers pull back, expecting subprime woes to put a damper on City bonuses this year. Note that that price level is considered mere “mid level luxury,” and still won’t get you very far in uber pricey […]
Read more...The securities industry is highly cyclical, and like the markets they trade in, Wall Street firms are prone to overshoot and undershoot. Executives cut too deeply in downturns, resolve not to repeat that mistake when they rebuild staffs in recoveries, keep hiring even when markets look overheated, and then repeat. To illustrate how extreme these […]
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