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Sunday, March 2, 2008

Housing/Subprime Roundup — March 3, 2008

Items of interest:

NY Times:
How a Bubble Stayed Under the Radar -- ONE great puzzle about the recent housing bubble is why even most experts didn’t recognize the bubble as it was forming.

Alan Greenspan, a very serious student of the markets, didn’t see it, and, moreover, he didn’t see the stock market bubble of the 1990s, either. In his 2007 autobiography, “The Age of Turbulence: Adventures in a New World,” he talks at some length about his suspicions in the 1990s that there was irrational exuberance in the stock market. But in the end, he says, he just couldn’t figure it out: “I’d come to realize that we’d never be able to identify irrational exuberance with certainty, much less act on it, until after the fact.”

With the housing bubble, Mr. Greenspan didn’t seem to have any doubt: “I would tell audiences that we were facing not a bubble but a froth — lots of small local bubbles that never grew to a scale that could threaten the health of the overall economy.” [...]

Solving housing mess without using the b-word -- Lawmakers debate foreclosure plans — just don’t call them bailouts

Bailout is a dirty word in the nation's capital. Lately, efforts by both Democrats and Republicans to clean up the housing mess are getting sullied with the b-word.

An inappropriate use of taxpayer dollars is what President Bush and Treasury Secretary Henry Paulson call some plans in Congress to aid homeowners stung by the mortgage market mess. For their part, Democrats say the Bush administration is more interested in bailing out Wall Street than Main Street. [...]
HSBC to reveal its U.S. subprime misadventure -- HSBC results will reveal just how much damage its toxic U.S. loan book is inflicting.

These are difficult times for the institution often referred to simply as "the bank" before it adopted its modern moniker of the "the world's local bank."

Typically, heavyweight HSBC's results are a barometer for the Hang Seng Index and an eye on the health of Hong Kong's economy. Not anymore. Instead today it's the pulse of the crumbling U.S. housing market and battered consumer that will be on display when the bank reports on Monday. [...]
Five Things You Need to Know: Where Does the Debt Crisis Leave Us Now? -- Among the proposals being considered are broad "rescue bills" that would enable the government to purchase outright some troubled mortgages and even a plan offered up a few days ago by the Office of Thrift Supervision that would create a system allowing borrowers to refinance into government-insured loans that cover the current value of their homes while the refinancing package would pay part of what's owed to the original lender with the remainder of the balance that isn't covered issued to the lender as a "negative equity certificate." The lender could then redeem the certificate if the home is eventually sold at a higher price.

This is nothing new. As the Debt Crisis continues its inexorable march from Wall Street to Main Street the call for government intervention will grow louder, the pressure more intense.

"The demands throughout the country and in Congress for direct Federal financial aid were growing more persistent during the summer of 1931. William Randolph Hearst, through his newspapers, advocated $5,000,000,000 Prosperity Loan to provide work relief for the millions of the unemployed. This plan was endorsed in resolutions sent to President Hoover by labor unions and municipalities in various parts of the country." -- From Spending to Save, 1936, by Harry L. Hopkins, relief administrator for the Federal Emergency Relief Administration and the Civilian Works Administration and Works Progress Administration under President Franklin D. Roosevelt.

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia