While we are arguing over political issues that are not true issues the dollar has sunk to levels not seen in years. The level of debt is astounding. Corporate oversight is at an all time low not seen since the 1920???s unregulated stock market or the days of the robber barons and monopolies that crippled the economy stifling competition. We have a housing market that is more like a funeral than a market with upside down mortgages, foreclosures, and evaporating value. Then add in the geopolitical issues that destabilize the energy supply, like the Middle East and South America. Plus there is the Individual debt, abusive business practices, unsustainable business strategies, corporate scandals, and general greed. Then top it all off with trade imbalances, national debt, war spending, poor ignorant management of the institutions of power in the nation, and we are still talking about issues in politics that have no real barring on how to fix a broken system. We are shocked by republican or democratic sex scandals. We are fighting over, race, gender, or religion while the real issues remain on the sidelines. We are failing the future generations if we continue the madness. We will fail the world if we do not leave behind our puritanical culture war and unify to correct the real problems facing the nation. More morality will not fix the economy. More religion will not fix the economy. The free market will not fix the issue of oversight, product safety, or ethics in business on their own. We have had 25 years of Milton Freidman economics and Leo Strauss or Irving Kristol political ideological results. We have a divided nation that is bankrupt both morally and financially, led by those proclaiming the influence of religion fused with government, a free market with an absence of oversight, and a government that under conservative republican control wishes noting but the elimination of government except for the military. We are seeing the fruit of their tree rooted in outdated, ignorant misconceptions of ideology, theology, ecology, and sociology. The failure of their political agenda has been the disenfranchisement and general distrust of government and the other higher institutions of the nation. They have betrayed the public trust not by sleeping with a call girl, rather they have violated it with absolution water-boarded by blind ignorance and a romanticism for an ideological concept that flawed with a focus on the ???ME??? instead of the ???WE.???
MONEY CULTURE
Daniel Gross
Subprimes: From Bad to Worse
The mortgage mess isn't causing our worsening economic condition; it's a symptom of a far more serious problem.
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The stock market rallied today after President Bush announced a deal under which mortgage lenders would cut subprime borrowers some slack and freeze rates. The rally represents the latest effort by the financial-industrial complex to draw a bottom line under the spreading credit woes. The market seems to have concluded that the negative effects of the subprime mess may finally be contained.
I hate to be the bearer of bad news, but the subprime flood—which has been declared contained over and over again—isn't contained yet. My NEWSWEEK colleague Daniel McGinn ably explains why the rate freeze is far from a panacea for all subprime borrowers. And a flood of new data indicates that the subprime woes may be a symptom—rather than a cause—of a broader economic malady. That awful smell in Midtown Manhattan isn't from the horse-drawn carriages carrying tourists around. It's the distinctive odor of debt going bad.
We've just ended a bubble in housing, in housing-related credit, and in all other types of credit. Low interest rates, competition for market share, the continual pooh-poohing of inflation, and the widespread use of securitization spurred banks and mortgage companies to lend with abandon. Any risk associated with lending could be ironed out by slicing and dicing debt and selling it to investors, who could in turn hedge their exposure to the debt through derivatives. Any remaining risk would be wiped out by growth, perpetually rising asset prices, and a willingness of other lenders to refinance existing debt on favorable terms. And so credit was available on easy terms to people in all walks of life: home buyers and real estate developers, car buyers and college students, consumers and private equity firms.
Today, however, the assumptions holding up the latticework of credit are coming apart, one by one. Even as the economy continues to expand, more and more borrowers are having difficulty remaining current on their debt. Which isn't surprising, given that median household income hasn't budged since 1999 (see Figure 1 on Page 4 of this Census report). What's more, in a natural reaction to reckless lending, mortgage companies and banks are now in money-hoarding mode and thus unable or unwilling to help Americans refinance existing debt.
The Mortgage Bankers Association today came out with its "national delinquency survey," which has nothing to do with high-school kids sniffing glue. "The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 5.59 percent of all loans outstanding in the third quarter of 2007," up from 4.61 percent a year ago. This figure, which doesn't include loans in the process of foreclosure, is "the highest in the MBA survey since 1986." While the pain was concentrated in subprime (16.31 percent of subprime loans were delinquent in the third quarter), the seasonally adjusted delinquency rate for prime loans rose to 3.12 percent from 2.73 percent in the second quarter.
As the volume and price of new home sales continues to fall, home builders are suffering as well. The Wall Street Journal reported yesterday that delinquencies on loans extended to condominium developers have risen sharply in the past year. In the third quarter, 5.9 percent of such loans were delinquent, up from 4.1 percent in the second quarter, according to Foresight Analytics. The delinquency rate for builders putting up single-family homes rose from 3 percent in the second quarter to 4.3 percent in the third quarter.
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