Home Prices Headed Lower
That’s the opinion of Edward Harrison of Credit Writedowns (among others), in a post at naked capitalism.
And he assumes, as many other already do too, that the FHA is the next big taxpayer bailout:
The fact is the F.H.A is the next Fannie Mae. If you’re looking and wondering where the next bailout will be, take a good look at the F.H.A. Not only is this agency guaranteeing hugely delinquent loans, but the Economic Stimulus Act of 2008 doubled the maximum loan that it could insure to $729,750 in order to cover jumbo mortgages common in cities like New York, San Francisco or D.C.. The purpose was to give liquidity to the frozen jumbo market in high-cost cities. However, the net effect is that the F.H.A was expanding at exactly the time when loan quality was falling. There will be significantly more losses as delinquencies mount.
To make matters worse, the F.H.A. has an abysmally low 0.53% insurance reserve ratio – that’s the lowest ever. Yes, this ratio includes expected future losses, but you don’t have to be a rocket scientist to know any downside wipes these guys out. And that means more taxpayer money will be forthcoming.
Is this a pretty picture? No. But, is this what is going to happen? Of course it is. So when the bailouts come because the foreclosures begin again in earnest and politicians start saying, “who could have known?” you will have every right to be disgusted.
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Amazing CNBC even has this up:
http://www.cnbc.com/id/33709379
So, is this really part of the Cloward-Piven strategy? Whether or not this and healthcare were orchestrated as such, the end-result seems the same direction to where the country is presently headed.
http://en.wikipedia.org/wiki/Cloward-Piven_Strategy
Comment by Henry — 11/20/2009 @ 1:37 pm
Surprised that it’s up — the only reason it was on the air is that it came from CNBC Asia.
Comment by BMB — 11/20/2009 @ 3:57 pm
The FED and Treasury are desperate to keep as much leverage in the system as possible. I’ve got a hunch this is going to end badly.
Comment by EDN — 11/20/2009 @ 5:39 pm
I don’t think there’s much doubt it’s going to end badly, just like the last time and the time before that…
It’s just a matter of when.
Comment by BMB — 11/20/2009 @ 5:41 pm