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Is $10 trillion bubble ready to burst?
October 7, 2006 (Milt Neidenberg – Workers World)
Lenders run wild
In a revealing Sept. 1 Wall Street Journal article headlined, “Housing Chill Begins to Pinch Nation’s Banks,” Robin Sidel wrote that “[b]anks have begun to warn investors that the housing slowdown is starting to hurt their business.”
The article explains that financial institutions are already grappling with “a difficult interest-rate environment, competition for traditional banking customers, a saturated credit-card market, and expectations that strong consumer-credit quality will soon show signs of weakening. ... As a result real estate, including mortgages, home-equity loans, and commercial loans, represented a record 33.5 percent of the U.S. banking industry’s $9,298 trillion in assets in July, according to the Federal Reserve. The numbers represent the highest level in the Fed’s database going back to 1973.”
Since then, this dependence on real estate assets has continued to rise.
Sandra Thompson of the Federal Deposit Insurance Corporation, speaking on Sept. 20 at the opening session of the Senate Banking Committee on Banking, warned of the dangers of nontraditional mortgage loans: “According to the publication Inside Mortgage Finance, an estimated $432 billion interest-only loans and payments-option ARMs were originated during the first half of 2006,” she said. ARMs are adjustable rate mortgages.
AntiSpin: It will come as no surprise to iTulip readers that our political perspective is generally what might be called Left Libertarian. At the other end of the spectrum of Libertarianism–at some distance from the position that government is inherently evil, free markets alone will allocate economic and social resources fairly across society on their own over time, and that the Air Force should be privately owned–is a notion that capitalism is good and socialism in its attempt to produce equality of result for all citizens is a proven disaster, but that capitalism on its own does a poor job of producing equality of economic opportunity, and in fact over time produces ever greater inequality of risk. Capitalism on its own also fails to provide society with uneconomical public goods, such as health care and education, and will wreck the environment in its spare time.
So it is not surprising that we find ourselves agreeing with most of the predicted outcome of the housing bubble offered below by Workers World. The peculiar thing about our time is that Workers World these days reads more and more like Pat Buchanan, minus the "raging sea of class struggle" part. But the idea that Joe Sixpack is going get stuck with the bill for cleaning up the Risk Pollution is a point that's hard to argue with.
To find out what to do, order our book americasbubbleeconomy
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Copyright © iTulip, Inc. 1998 - 2006 All Rights Reserved
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer
October 7, 2006 (Milt Neidenberg – Workers World)
Lenders run wild
In a revealing Sept. 1 Wall Street Journal article headlined, “Housing Chill Begins to Pinch Nation’s Banks,” Robin Sidel wrote that “[b]anks have begun to warn investors that the housing slowdown is starting to hurt their business.”
The article explains that financial institutions are already grappling with “a difficult interest-rate environment, competition for traditional banking customers, a saturated credit-card market, and expectations that strong consumer-credit quality will soon show signs of weakening. ... As a result real estate, including mortgages, home-equity loans, and commercial loans, represented a record 33.5 percent of the U.S. banking industry’s $9,298 trillion in assets in July, according to the Federal Reserve. The numbers represent the highest level in the Fed’s database going back to 1973.”
Since then, this dependence on real estate assets has continued to rise.
Sandra Thompson of the Federal Deposit Insurance Corporation, speaking on Sept. 20 at the opening session of the Senate Banking Committee on Banking, warned of the dangers of nontraditional mortgage loans: “According to the publication Inside Mortgage Finance, an estimated $432 billion interest-only loans and payments-option ARMs were originated during the first half of 2006,” she said. ARMs are adjustable rate mortgages.
AntiSpin: It will come as no surprise to iTulip readers that our political perspective is generally what might be called Left Libertarian. At the other end of the spectrum of Libertarianism–at some distance from the position that government is inherently evil, free markets alone will allocate economic and social resources fairly across society on their own over time, and that the Air Force should be privately owned–is a notion that capitalism is good and socialism in its attempt to produce equality of result for all citizens is a proven disaster, but that capitalism on its own does a poor job of producing equality of economic opportunity, and in fact over time produces ever greater inequality of risk. Capitalism on its own also fails to provide society with uneconomical public goods, such as health care and education, and will wreck the environment in its spare time.
So it is not surprising that we find ourselves agreeing with most of the predicted outcome of the housing bubble offered below by Workers World. The peculiar thing about our time is that Workers World these days reads more and more like Pat Buchanan, minus the "raging sea of class struggle" part. But the idea that Joe Sixpack is going get stuck with the bill for cleaning up the Risk Pollution is a point that's hard to argue with.
As the institutions of high finance face bankruptcy—victims of their own greed and hyper-speculation—the government will bail them out at the expense of the worker/taxpayers, leading to a conflict between the people and the government.
On the other hand, real estate institutions and investors like Fannie Mae and Freddie Mac—government-sponsored enterprises that package billions of dollars of mortgage-backed securities—will have the backing of the government when they fail.
Ultimately, as recession and further social convulsions ignited by “preemptive” wars engulf the imperialist government, the predatory interests of the billionaire class will be pitted against the entire multinational working class. Organized and unorganized, immigrant and native, poor and middle class, they will be swept into the raging sea of class struggle, with great consequences for the whole world.
_____________________________On the other hand, real estate institutions and investors like Fannie Mae and Freddie Mac—government-sponsored enterprises that package billions of dollars of mortgage-backed securities—will have the backing of the government when they fail.
Ultimately, as recession and further social convulsions ignited by “preemptive” wars engulf the imperialist government, the predatory interests of the billionaire class will be pitted against the entire multinational working class. Organized and unorganized, immigrant and native, poor and middle class, they will be swept into the raging sea of class struggle, with great consequences for the whole world.
To find out what to do, order our book americasbubbleeconomy
To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List
__________________________
Copyright © iTulip, Inc. 1998 - 2006 All Rights Reserved
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer
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