Greenspan: You Can't Say I Didn't Warn You
It is often said that Alan Greenspan speaks in code and that the markets hang on his words, searching for subtle hints. How's this for nuance? "'It is the time to act to fend off the problems that are almost inevitable,' Greenspan said in answer to questions from Rep. Richard Baker, (R-La.)"
"Enabling these companies to increase in size...we are placing the total financial system of the future at a substantial risk." Now that's some serious C.Y.A.!
He is refering to the GSE's, Fannie Mae and Freddie Mac, which as Reuters tells us, will be back in the spotlight this week. "On Wednesday, the Fed chairman will testify before the Senate Banking Committee on regulatory reform of government-sponsored enterprises, or GSEs."
Readers of this blog have heard all this before, but in a week expected to be devoid of financial news, his testimony may be interesting.
11 Comments:
The GSE blowup is going to make the S&L crises look like a minor banking problem. It is outrageous how corrupt these people are!
The banks lend to anybody with a pulse, take their fees from loan origination then wipe their hands free of any risk by selling the loans off to the GSEs. Of course the FHA will back the defaults won't they? Oh wait, the FHA and GSEs are backed by the federal government. Oh wait, the federal government is funded by who?
This is the biggest tax payer fraud scheme yet hatched! I do not know why we don't have a lynch mob in DC yet!
The GSE blowup is going to make the S&L crises look like a minor banking problem. It is outrageous how corrupt these people are!
The banks lend to anybody with a pulse, take their fees from loan origination then wipe their hands free of any risk by selling the loans off to the GSEs. Of course the FHA will back the defaults won't they? Oh wait, the FHA and GSEs are backed by the federal government. Oh wait, the federal government is funded by who?
This is the biggest tax payer fraud scheme yet hatched! I do not know why we don't have a lynch mob in DC yet!
(It is going to be so interesting to watch how this works, the next time the hedge funds decide to sell their mortgage-backeds. Who is going to buy them?)
There won't be any buyers. Banks will be forced to tighten their lending standards without the GSEs. I doubt that the banks are going to add to their already over-sized mortgage portfolios. Only the best credit quality will be marketable.
I get the feeling that this is coming to a head. Do you?
Greenspan is scheduled to speak 3x this week.
This is interesting: http://prudentbear.com/randomwalk.asp
Ben: this like will probably be replaced tomorrow. You might want to copy it to an entry.
In other news, the dollar strengthened against the yen... what the hell are markets thinking ???
Everyone knows that GM is going to have a debt problem sooner or later and now we have the mortgage market and Fannie & Freddie.
What exactly do foreign central banks have to see before they pull the plug on buying the US dollar ?
The GM issue is $600 Billion. The mortgage market is trillions of dollars. Ironically GMAC owns a bunch of mortgage debt as well. (Nothing like focusing on consumers ! Cars payments and mortgage payments...)
Am I missing something here ?
Wall Street Examiner writer is going to sell his house and take profits.
http://wallstreetexaminer.com/
See "Real Estate Bubble Front Row Seat"
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(The GSE blowup is going to make the S&L crises look like a minor banking problem. It is outrageous how corrupt these people are!..This is the biggest tax payer fraud scheme yet hatched! I do not know why we don't have a lynch mob in DC yet!)
Agreed, and corruption is the issue. People are gonna be so pissed when this thing goes south; it may be unprecedented.
(the next time the hedge funds decide to sell their mortgage-backeds. Who is going to buy them?)
Yeah, the hedge fund angle is a wild card in this all-ready convoluted situation.
(Everyone knows that GM is going to have a debt problem sooner or later)
GMs problems have already shaken the junk bond market. AIG is adding another shock to bonds. A very serious matter, good point.
Thx for commenting..Ben
For all those currency traders out there. When the recession occurs that results in falling home prices or the fall in home prices that causes the next recession (really makes little difference what order they occur), the dollar is going to go up not down. The logic is simple falling U.S. comsumption will cause the trade balance to improve. The rest of the world which employs an economic model based on selling their goods to U.S. consumers will see their economies slow dramatically. They will be forced to stimulate both from a monetary and fiscal prospective. This will put their fiscal and trade accounts more in line with the U.S.. This will cause the dollar to increase in value not decline. When the U.S. went into recession in 2000, the dollar went up. It was only after the Bush admin cut taxes twice and Fed convinced the U.S. taxpayer to leverage up as much as possible that the dollar started to go down in 2002. During the process of deleveraging the opposite will occur. So to all those who are shorting the dollar as a hedge against their homes, not a good idea.
FX poster,
I mostly agree about the dollar's potential refersal. I've been long CHF since 2000 and have enjoyed the 40% ride. There may be another 5-10% fall, but the risk/reward for shorting the dollar is very low right now. Whats supporting the dollar now is the interest rate differentional between the US and other countries. However, if we stop raising rates or the Eurozone starts raising rates anytime soon, the $$ is doomed.
The only thing that could tank the dollar is a big federal government deficit, something on the lines of $1 trillion or more, combined with continued low interest rates from the fed.
And this notion that foreign central banks "lose money" on their dollar portfolios is absurd. The central bank and the interests of the state itself are identical. The Japanese have two choices: either work hard and accumulate a lot of dollars now to pay for an aging population in the future, or go on a consumption spree now (like the Americans) and to hell with the future. Mild inflation in the United States doesn't change things. A trillion dollars that only has half a trillion dollars of purchasing power twenty years from now is still a hell of a lot of money.
The only thing that could tank the dollar is a big federal government deficit, something on the lines of $1 trillion or more, combined with continued low interest rates from the fed.
And this notion that foreign central banks "lose money" on their dollar portfolios is absurd. The central bank and the interests of the state itself are identical. The Japanese have two choices: either work hard and accumulate a lot of dollars now to pay for an aging population in the future, or go on a consumption spree now (like the Americans) and to hell with the future. Mild inflation in the United States doesn't change things. A trillion dollars that only has half a trillion dollars of purchasing power twenty years from now is still a hell of a lot of money.
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