Movie Sequels Are Generally Worse Than The Original. What About Financial Bubble Sequels?

Are you ready for Sub-Prime Mortgage Bubble _ The Sequel? You’re probably thinking you still haven’t recovered from the 2008 original. Well, if Mel Watt gets his way, the sequel will be coming to a neighborhood near you soon. Who is Mel Watt? He was named by President Obama last year to be Director of the Federal Housing Finance Agency (FHFA). If you recall, that is the agency that took the bankrupt Fannie Mae and Freddy Mac into receivership after the collapse of the original sub-prime mortgage bubble popped.

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Prior to his appointment, Mr. Watt was a long time Congressman from North Carolina and before that he was a practicing attorney. According to Wekipedia, as a lawyer, Mr. Watt specialized in minority business and economic development law.  It sounds like Mr. Watt’s has his roots in”community organizing”. Imagine that!

So, what is Obama’s clone proposing? As reported by the Wall Street Journal back in May and by Fox News just the other day, he wants banks to loosen their lending standards, so that those with poor credit ratings can buy a house and he wants the banks reduce their down payment requirements to just 3%. Does that sound familiar? Well, of course it does. It’s a sequel, after all.

Of course, Mr. Watt has all the politically correct rational for his proposal. It will spur the housing construction sector and create jobs! More importantly, it will help all those dead beat victims in America buy a house they can’t afford. But. Mr. Watt is a clever little rascal. He is working hard to get the bank regulators on board with his plan. That way, when the SHTF, he will have plenty of places to point all ten of his fingers. Not surprisingly he is working closely withe bankers, who don’t like that the regulations after 2008 are hurting their profits. The bankers, as you all know, just want to help the less fortunate among us. That’s is why they will package those mortgages into security back derivatives and sell them before the buyer’s signature has had a chance to dry. By the way, Zero Hedge had a guest post on Mr. Watt’s plan a couple of days ago. The author, Mike Krieger, found this interesting tid bit:

While some observers consider Watt’s appointment a significant lurch to the left compared to DeMarco, (he was among those named by the Democratic Socialists of America as a member of their caucus in 2009), Watt himself has raised a tremendous amount of money from banking and real estate-related corporations and trade associations. One report from the Sunlight Foundation found that for 2009, Watt had received some 45 percent of his total campaign funds from donors in the finance and real estate sector.

Some things never change, do they?

Your humble observer of the asylum we all have to live in has some advice for you, dear readers: do whatever you can to make sure your pension funds do not invest in mortgage-backed-securities. Period!

Well, that’s what I’m thinking. What are your thoughts?

 

 

 

 

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15 thoughts on “Movie Sequels Are Generally Worse Than The Original. What About Financial Bubble Sequels?

  1. A BUBBLE THAT KEEPS GOING FURTHER DOWN THE RABBIT HOLE. THIS ONE NEEDS TO REACH ROCK BOTTOM AND WE NEED AN INTEGRITY CLEANING, A SPIRITUAL CLEANING, AND SOME OTHER CLEANING. THIS RABBIT HOLE IS USED AS AN INTERSTATE FOR ALL THESE BUBBLES THAT TRAVEL. ULTIMATELY THE MARK OF THE BEAST SHALL COME, AND AFTER THAT THE KINGDOM OF GOD AND RETURN OF JESUS CHRIST, OUR ONLY SOLUTION. YES WE ARE ALL APPROACHING THE BOOK OF JOBE AS WELL.

  2. Not to worry. Who has any money to buy a house these days with anything down? My house has lost half its value. The only thing propping up things are the investors who buy at the disclosures and then rent them out. I wouldn’t buy a house no how even if there was no money down. My area is considered a great place to live,great schools, low crime.. you know the drill. One will never be able to unload it.

  3. The good news is that FHFA is still somewhat handcuffed in what it can do with Fannie and Freddie. Hopefully, the reins will not be loosened enough for it to do much damage. Some court cases could change all that, though.

  4. With the potential of millions of soon to be legal illegals wanting/needing to purchase a place of their own it would be racist to apply sound banking and financial policies to applicants who would otherwise be turned down. I was in banking during the 2000’s, the time when an extra 25-100 BPs (basis points) added on to one’s rate would avoid the need to prove the means and ability to meet one’s monthly mortgage obligation. The banks and mortgage brokers, with a wink and a nod to appraisal companies, worked hand in hand with the government in destroying the housing markets. Once again the time is ripe for the sequel.

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