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 We are seeing the fruit of their tree rooted in outdated, ignorant misconceptions of ideology, theology, ecology, and sociology.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.???
- 1
- 2
Subprimes: From Bad to Worse
Email To A Friend
Please fill in the following information and we'll email this link.
Other types of consumer debt, which have nothing to do with housing and nothing to do with subprime, are starting to go bad too. The Wall Street Journal reported today that "about 4.5 percent of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9 percent the previous month, according to a Lehman Brothers survey of companies servicing these loans." In October, Fortune's Peter Gumble warned that a similar plague may soon afflict credit card companies. In October credit card giant Capital One Financial reported that the delinquency rate on credit cards for the third quarter of 2007 was 4.46 percent, up from 3.53 percent in the third quarter of 2006. That's an increase of 26 percent. "Given current loan growth and delinquency trends," Capital One reported, it "expects the U.S. card charge-off rate to be around 5.25 percent in the fourth quarter."
The stock of First Marblehead, which has enjoyed explosive growth making private (i.e., not federally guaranteed) student loans, has been hammered in recent days because Moody's, the ratings agency, concluded that loans it had made "appear to be defaulting at a significantly higher rate compared to loans originated through school financial aid offices." The Wall Street Journal reported that "seventeen months after First Marblehead arranged one 2005 package of student loans, 2 percent had defaulted, according to the company's monthly reports to note holders. But last month a comparable 2006 package—also 17 months after issue—had a default rate of 3.98 percent."
And so it goes. The next arena likely to see a spike in delinquencies and then defaults? Corporate bonds. In September ratings agency Standard & Poor's warned of a potential wave of defaults.
Investors may have thought that Bush and Treasury Secretary Henry Paulson stuck their fingers in a hole in the dike, thus forestalling disaster. But given the rising tide of bad debt across the economy, today's actions are more like throwing a sandbag into a rising Mississippi River.
© 2007
- 1
- 2
Discuss