Admitting Bubble "Not An Option"

The DallasNews editorial by Danielle DiMartino has this headline, "High stakes won't allow us to admit housing bubble." Here are some quotes.

"The powers that be insist there's no housing bubble. They have to, mass delinquencies and foreclosures are simply not an option, not with the risks built into the mortgage-finance system. The general concern about these instruments is that they've yet to be 'tested' by an inevitable market downturn. Is there risk in today's lax lending standards?"

"John Vogel (said that) when the government first noted the risks in the savings and loan industry, he remembered, a pencil-to-paper exercise put the risk at about $40 billion. 'We knew we had a problem back when the S&Ls were on the skids in the early '80s. Instead of taking care of it then, we waited until we had a $500 billion problem.'"

"Ten years ago, when the whole securitized mortgage market was $1.6 trillion, Fannie and Freddie held about $76 billion on their balance sheets, or less than 5 percent. Today, Fannie and Freddie either own or back about $3.5 trillion of a $5.5 trillion market."

"Eating away at these protections are no-income verifications, piggyback loans made only to skirt the mortgage insurance requirement, builders paying closing costs so buyers cross the threshold owing more than the house is worth, and lenders doing everything they can to avoid foreclosing."