20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover

[JAD_333]

As usual 60 Minutes jumps on the crisis bandwagon without looking around for experts who disagree with its guest on the seriousness of the second wave of mortgage defaults.

The "Coming Alt-A Mortgage Reset Bomb" Is A Myth

Henry Blodget | Aug. 28, 2009, 11:34 AM

Read more: The "Coming Alt-A Mortgage Reset Bomb" Is A Myth

The Alt-As and actions arms which are supposed to lead to a massive second wave of foreclosures are not just sitting there waiting their turn to melt down. Many of them have already gone belly-up in the current wave of foreclosures. Same for many action arms.

Also, Alt-As (no docs) went to borrowers whose credit scores were above sub prime. Although somewhere around 70% of these borrowers inflated their income when applying, they were on the whole stronger than sub-prime borrowers.

We're still have a long way to go before the housing market is cleaned up, but the problem may not be as bad as 60 Minutes portrayed.

[Julie]

The problem is that the Obama administration is eager to blame the economic decline on a bunch of "fat-cat," "greedy bankers" from Wall Street who were bailed out by the government. The president himself stated to the bankers, "You guys caused the problem." They did not.

These problems were caused by the bubble in the housing market created in large part by Congress. Democrats that are blaming Wall Street as the villain forget the congressional mandate they placed on Fannie Mae and Freddie Mac to put 55 percent of their funding into mortgages for people at or below the median income. This SEC civil fraud charge against Goldman conveniently fits into their political agenda.

As the administration tries to assess blame for the economic decline, do not forget the role of Congress and the acceptance by members of millions of dollars a year in lobbyist contributions to support Fannie Mae and Freddie Mac. Had the housing market soared for a couple of more years, as many believed it would, Goldman and Paulson could have lost billions. But in this case, their purchase virtually coincided with the housing collapse. Within five months after the securities were sold, 83 percent of the bonds in the packaged securities were downgraded by rating agencies. The plunge in prices brought a fortune to those who sold them short and great losses to those who bought them long. The investors acted, in both cases, in what they judged would be best for their interests.

The oversimplification of these issues in hostile congressional hearings is a disservice to the public.

[astralis]

julie,

These problems were caused by the bubble in the housing market created in large part by Congress

no it's not; that's just -one- part of the bubble, and not even the largest part. the amount of leveraging and the disappearance of differences between what's supposed to be a low-medium/risk institution backed by government funds/very high risk institutions (investment banking) played a far larger role.

in short, much of the banks' -own- self-regulation went away. which makes sense, because the short-term profit in a bubble is absolutely immense.

well, here's the source of what you posted-- interesting selection of the passage, because in the very sentence before the one you quoted, zuckerman states:

Many of the reforms touched on here are included in the financial overhaul bill moving through Congress. There could have been a sensible and constructive review, especially now that the Republicans seem to have given up their unhelpful negativism.

Mort Zuckerman: Congress Had a Role in the Financial Crisis - US News and World Report

[Julie]

Well, what do you think about the 'Bond Fund Bubble'? Do you think it really exists, and if so, what do you think about it?

Do you think interest rates will rise at such a rapid rate that it will jeopardize bond investments?

[Roosveltrepub]

Julie, The inflation rate is dropping and was the lowest in 6 yrs in March and the 10yr yield on treasuries is still very low. The FED said they expected an extended period of low rates.

[NUS]

Some thoughts from Citibank's Chief Economist Willem Buiter:

Willem Buiter Issues His Most Dire Prediction Yet: Sees "Unprecedented" Fiscal Crises, US Debt Inflation And Fed Monetization | zero hedge

[Julie]

A Reuters poll of economists (1 April) predicted a rise to 0.75% in December and then to 1.25% by around Feb/March of 2011, reaching 2.25% by the end of 2011.

However, expectations have suddenly shifted in the past week due to inflation concerns. Money markets are now pricing in a far greater chance of a rate rise in 2010.

[Roosveltrepub]

Julie. I missed where that was from. I googled but honestly reuters economists inflation usa gave me nothing but positive articles about the U.S. economy. Even if it hit 2.25% that's not exactly high inflation. Rates are expected to remain the same for the year. To be scared of possible inflation 2 yrs out is a bit much. People were clamoring at the beginning of last yr. we'd have it this year and the rate dropped.

[Canmoore]

Hear in Ontario we just got hit by the HST (harmonized sales tax). As a consumer, I hate it because it has made some items, namely gas, go up. However, if you believe the jargon being spewed by the politicians and economists, it will be good for business. And help our province/country compete against cheap overseas labour.

From what I gather, the problem lies in that western countries have layers of taxes, federal, provincial/state... while many nations that are producing todays cheap products do not have the same complex tax structures.
By simplifing the tax system, it apparantly makes our companies more competative. If this is true, and not just a tax grab. Than I am all for it.

Interestingly enough, the US is the only western country not to adopt this type of harmonized tax..at least thats what I heard on a talk show.