Lenders are going to have to do that A LOT, and overhaul their banking practices throughout the system ... but they're not going to do it unless they are forced to under pain of criminal prosecution, and they're not going to do it for one moment beyond the arrival of that magical bail-out balloon that would whisk the top-executives away to never-never land.

The Great Fractal and Macroeconomic Phase Transition.....?

24 October 2007 completed a 20/49/49 day growth period for the Great Wilshire with a low on 16 August at day 49 near 2.5X of the second fractal, a gapped high on day 40 (2x) of the third fractal and a secondary lower high on day 49 (2.5x) of the third fractal. A great phase transition will soon occur for the world economy, commodities, equities, gold, and the US dollar. The weak link New Century broke down (as anticipated) on day 31 of 15/31 day fractal losing 16 percent to 6 and 3/10 pennies. Expect a reckoning transition .... for the Global Macroeconomy.

Banks don't make money UNLESS the interest on outstandings loans are paid back and this is the reason that our current financial situation cannot continue. When people stop paying in the hundreds of thousands the system stops functioning and when in gets into the millions in collapses.

Why DO banks fail during recessions and depressions? Because people stop paying the loans and there is no profit because their is no interest payments and no new interest generating loans.

If ALL financial institutions don't wake up and adopt this type of policy soon the current system will collapse. They need us in debt but the debt must be manageable. When america can no longer consume the entire world economy will grind to a halt and the billionaires will have tons of worthless paper. Why does greed always override common sense?

Greenspan sits back and watches tech go up based upon insanity and speculation, but says nothing, allowing young CEOs and wall street to make a bundle until tech explodes and some people lose their shirts.

Greenspan then artificially holds down interest rates to try to hide the economic downturn caused by exploding tech. Low interest rates hurt seniors who invest in CDs and discourages savings.

Low interest rates also means the amount of money people can "afford" to borrow to buy a home goes way up. Complete lack of controls on the federal financial system also allows lenders to loan money without appraisals for many homes, without any evidence that the borrower is even employed, and without any down payment. Instead of paying a downpayment, the buyers pay enormous fees to the lender. They get their money up front.

Real estate prices rise artificially because people can borrow more. Until the interest rates start to go up, at which time the fact that all these borrowers could not afford the amount they borrowed leads them to stop making payments, house goes into foreclosure, real estate prices go down. That's how it should work. Banks or whoever owns the loan takes a loss. Loan of $500,000; foreclosure; house re-sells for $400,000; lender loses $100,000.

So what's the lender's fix? Avoid foreclosure at all costs. They will give borrowers 40 year loans, 50 year loans, 60 year loans. Soon people will be in debt to buy a house for longer than the house will be standing.

Countrywide is not doing these homebuyers any favors. The defaulting buyers would be better off walking away, renting, waiting a few years, then buy again when prices come down to what they can afford.

Well thats real nice of them, but what about the people who have fallen behind for economic reasons, because Bush's "for the rich economy "sucks. There are hard hit areas in this country where a loss of a job is a complete disaster because the only other job available is a mcjob. I don't think it is fair to just bail these people out who were stupid enough not to know what they were signing. I have been in a house for 17 years and am having a hard time now making the payments because one of us lost our job. We have a 30 yr mortgage. So what. Who helps us. I think there should be a moritorium on all forclosures until the rich pay us back their fair share of taxes and we, the taxpayers, get the billions back that has been wasted in Iraq. It is time for a Boston Teaparty folks.

And I was saying..........

however, shares were up 2.0% to $15.68 in pre-market trading Tuesday.
Horray! We've turned the corner and the economy going swimmingly.
Now, whats next?


Got Rope?

While I tend to look at lenders as basically just a notch above Sauron on the evil scale This is a pretty good solution.

They take a paper hit on projected profits but since fewer loans will go to default they won't be saddled with reposessing and reselling homes in a crappy market. So by reducing their margin and cost to the consumer they are in effect maximizing profit and benefitting the consumer and the economy at large.