U.S. Mortgage Crisis Rivals '80s S&L Meltdown

Wall Street Journal:

The home has long been the bedrock asset of most American families. Now, its value has become the biggest question mark hanging over the global economy and financial system.

Over the past decade, Wall Street built a market for more than $2 trillion in securities sold globally and backed by loans to U.S. homeowners on two long-accepted beliefs and one newer one. The prevailing logic: The value of the American home would never fall nationwide, and people would almost always make their mortgage payments. The more recent twist: Packaging mortgage loans and turning them into securities would make the global economy more resilient if anything went wrong.

Read the whole story: Wall Street Journal

Comments

[themodernleader]

What happens if the real estate market collapses as in the early 1930's? It is realistic to predict that families who owe $300,000 on a house that is appraised at 200,000 dollars will simply walk away from their obligation, especially as the decent paying jobs are disappearing at the same time. AAA rated loans/bonds will revert to junk status. Then will the problem be comparable to the Reagan-era debacle?
Indeed, we are faced with a dangerous condition to say the least.

[mmckinl]

The current mortgage crisis is much worse than the S&L crisis. Paulson and the banks are hiding most of the damage to keep from going to prison for their complicity is this massive fraud.

MORTGAGE MELTDOWN
Interest rate 'freeze' - the real story is fraud
Bankers pay lip service to families while scurrying to avert suits, prison
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/09/IN5BTNJ2V.DTL

[michnovak]

It's about TIME someone connected the two. It's the same M.O. — find an obscure investment vehicle, sign on some people who trust you (I mean who would think that bonds, or houses, would be risky), and grab as much cash as possible before the music stops.

For those of us who remember the S&L debacle, this seems like 1989 all over again. When the smoke clears, the ones holding the bag will be the taxpayers.

[swift goat pet for truth]

At least the Bush Boom is based on something real, land.
Not at all like that phony Clinton Internet bubble, based on phony companies like Yahoo, Amazon, and eBay.

[fourex]

The words Crisis and Meltdown camouflage the criminal aspects of both highway robberies.

[Blutus]

Liberal Press Conspiracy.

Everyone knows the Republicans are more
fiscally responsible than the Dems.

They have common sense and have run a business, met a payroll, etc.

It is just a coincidence two of our greatest
post-war economic catastrophes took place
during Republican administrations.

Just like it was a coincidence that Slick
Willie presided over the greatest post-war
expansion of the economy.

Damn liberals.

[VivaZapata]

Soon there will be more Europeans owning New York real estate than Americans. China will own everything else. We took the land from others, but we sold ourselves out to others. It's not irony, but it does make you scratch your head in wonder.

[RabidRightRebel]

Sub-Prime based mortgage securities are now selling at up to 50% discounts to there initial sales price. This discount is not yet reflected in the actual house prices but it soon could be. After all a vulture fund that buys the debt at a 50% discount could foreclose and sell property at 30% to 40% discounts and still turn a tidy profit.