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Thursday, December 06, 2007

crunchy credit

As I've mentioned before, one of the main products I cover at work are mortgage/asset backed securities. Which puts me smack dab in the middle of all this sub-prime-credit-crunch-oh-my-god-the-sky-is-falling crisis. I'm like on the front lines yo.

I gotta tell you, I'm really not happy about the plan unveiled today. I never thought I would say this but I mostly agree with a SF Gate editorial writer...the Bush administration's plan really is the "methadone plan for the mortgage crisis."

This is one of the things I hate about politics. Since it's an election year all the politicians have to act like they care when people are losing their houses, but let's be honest with ourselves here: These sub-prime borrowers are not people you should feel sorry for. Why? Well, for the most part at least, these are the people who shouldn't have even been given loans in the first place! A lot of them put no money down on their homes, already had bad FICO scores and lose nothing except their mortgage payments (which you can look at as rent anyway) if they default. Why am I supposed to feel bad for them again? They got to live in houses they never should have been able to afford for two years. Sure the lenders and Wall Street and all those funds are to blame for this mess, but that doesn't mean sub-prime borrowers have necessarily been victimized in any way. In fact, they're kinda one of the winners in all of this. Because now the government is bailing them out so they can stay even longer in houses they can't afford. The real loser is your pension fund.

Also, from what I've heard around the office is that the issues having the most problems with defaults are from 2006 not 2005. This of course is significant because the 2006 rates haven't even reset yet. Which means the most problematic of the sub-prime loans are those that have been taken out by people who can't even afford the teaser rates. So really this "solution" isn't even going to do anything to alleviate the worst of the problems. The real problem here is that a lot of people took out loans they can't afford period. Not even at the teaser rates.

So let's be honest with ourselves, this mess is way too big to "fix" in any meaningful way. It's time to let the chips fall where they may.

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wingless was still breathing at 4:02 PM -

i was wondering when all of this would blow back and kick everyone in the ass. who knew the kick back would be so painful though? heh.

psst. guess who's "back"? moi
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