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December 30, 2007
Dave Barry on Subprime and the Economy
Some economy-related snippets from humorist Dave Barry in his year-end review. I'm particularly fond of his subprime comments, like the problems with dogs and mortgages, and Wall Street executives being forced to accept lucrative retirement contracts.
On the dollar:
- On the economic front, the dollar continued to lose value against all major foreign currencies and most brands of bathroom tissue.
- In economic news, the Federal Reserve Board, responding to recession fears and the continued weakening of the dollar, votes unanimously to be paid in euros.
On subprime:
- There was a major collapse in the credit market, caused by the fact that for most of this decade, every other radio commercial has been some guy selling mortgages to people who clearly should not have mortgages. ("No credit? No job? On death row? No problem!") It got so bad that you couldn't let your dog run loose because it would come home with a mortgage. The subprime mortgage fiasco resulted in huge stock market losses, and the executives responsible, under the harsh rules of Wall Street justice, were forced to accept lucrative retirement packages.
- In Washington, President Bush proposes to ease the subprime mortgage crisis via a two-pronged program consisting of interest rate freezes and water-boarding.
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I love it: It got so bad that you couldn't let your dog run loose because it would come home with a mortgage.
I don't love this: the executives responsible, under the harsh rules of Wall Street justice, were forced to accept lucrative retirement packages. Is it true? Not really. There is no merits system in Wall Street. W shall be stand for Waste this year.
In DC, GWB is doing something that make the housing market even more unstabized. His programs are to prolong the disease, not to cure.
Look at the core issue: why CDO or SIV are being write-down or write off? Because its collateral has a value: either no value, less value or value hardly to be evaluated.
We need a strong demand to consume overhang of housing inventory. But that demand is generally needing a banker's willingness to lend. If a judge has his power to change a value of the collateral for a banker's loan, what is going to happen?
An Uncertainty will be created for lending just as it has been now no way to make sure the value of SIV's collaterals. That's will limit a banker's willingness, if not eliminate it.
It is a common sense: let the housing fall naturally when FED is trying to create a healthy ecology to INCREASE a "willing, able, ready" demand to the housing market.