so can the Fed keep this up indefinately? What are the consequences of these actions? inflation? if so aren't we trading a crash for permanent(or at least long-scale) lower purchasing power for all consumers?
Margin calls on mortgage lenders at unprecedented levels
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Re: Margin calls on mortgage lenders at unprecedented levels
#12Is anyone of the impression that houses should NOT be purchased by companies like Zillow, Redfin, and Berkshire Hathaway?
After 2008, if the government had allowed the housing market to actually be a market, then we wouldn’t have the housing crisis of today.
Instead, corporations with access to cheap money, spent billions to buy distressed houses on the cheap, and held it for a few years, until it became extra profitable for them to flip it at a very healthy profit.
The game is rigged, fellas.
Re: Margin calls on mortgage lenders at unprecedented levels
#13Sure, why not, let's have the unemployment of 1929, the pandemic of 1918, and the collapse of an unsound financial sector à la 2008. It'll be swell.
Well, we didn't actually have the collapse in 2008. It all got propped up in the vain hope that the banking sector would stop doing stupid risky things.
Now we have the same choice. We can prop it all up again, in the vague hope that bankers will change their behaviour. Or we can let Wall St go to the wall.
If we do prop it up, we have to know that we'll need to do that again in another 10 years, and again after that, and so on. Until the bankers change their behaviour.
Re: Margin calls on mortgage lenders at unprecedented levels
#14I mean people who can't work aren't going to be able to make rent. Landlords then cannot make mortgage payments so they default. Mortgage lenders are now up a creek without a paddle.
More complicated is that the shorts on MBS which mortgage servicers use to hedge their exposure to non performing loans are also losing money. As Fed buys more and more MBS the loan services can no longer recoup money via their hedge, can’t get payment out of borrowers, and often can’t even resell the loan since lots of them are recently refinanced and now with forebarence have not made their first payment.
Re: Margin calls on mortgage lenders at unprecedented levels
#15Sure, why not, let's have the unemployment of 1929, the pandemic of 1918, and the collapse of an unsound financial sector à la 2008. It'll be swell.
Well, we didn't actually have the collapse in 2008. It all got propped up in the vain hope that the banking sector would stop doing stupid risky things. Now we have the same choice. We can prop it all up again, in the vague hope that bankers will change their behaviour. Or we can let Wall St go to the wall. If we do prop it up, we have to know that we'll need to do that again in another 10 years, and again after that…
The only thing that would change the status quo would be personal responsibility to the criminals in charge, the actual persons, not a vague concept of "system". Those that rigged the game, that live luxurious lives beyond our dreams off bailouts that we paid in a crisis that caused suffering to billions of people.
If those responsible got life sentences en masse for their crimes which probably killed far more people than any serial killer could hope for, then maybe their ilk would think twice before doing that. When punishment is effectively ZERO, then why not risk it?
Re: Margin calls on mortgage lenders at unprecedented levels
#16Sure, why not, let's have the unemployment of 1929, the pandemic of 1918, and the collapse of an unsound financial sector à la 2008. It'll be swell.
It's ironic that the economy / stock market hasn't become more resilient since 2008, despite more measures being taken. I mean sure, it's more difficult to get a mortgage you can't pay now (speaking for myself), but there's so much more fragile stuff that has been added in the past ten years; for example, a lot more amateurs have jumped into the stock market because one, savings interest rates have plummeted to effec…
From what I've read, Wall Street never recovered after 2008 since nobody trusts any counterparties. That's why the interest rate has been held at zero.
In some sense, Wall Street has been a zombie since 2008.
At that time, mortgage-backed securities were one problem. Today auto loans are supposedly pretty frothy.
Re: Margin calls on mortgage lenders at unprecedented levels
#17I mean people who can't work aren't going to be able to make rent. Landlords then cannot make mortgage payments so they default. Mortgage lenders are now up a creek without a paddle.
More complicated is that the shorts on MBS which mortgage servicers use to hedge their exposure to non performing loans are also losing money. As Fed buys more and more MBS the loan services can no longer recoup money via their hedge, can’t get payment out of borrowers, and often can’t even resell the loan since lots of them are recently refinanced and now with forebarence have not made their first payment.
Thank you for explaining that simply to me.
Re: Margin calls on mortgage lenders at unprecedented levels
#18For everyone thinking of the 2008 financial crysis: My layman point-of-view is that the market for mortgage backed securities in the US is nearly 20 times smaller compared to 2006 https://www.statista.com/statistics/275746/rmbs-issuance-in-...
Because we’ve nationalized the mortgage lending industry while keeping up a very expensive veneer of a private market in the form of originators and servicers. It’s the pessimal combination of capitalism and socialism.
Re: Margin calls on mortgage lenders at unprecedented levels
#19so can the Fed keep this up indefinately? What are the consequences of these actions? inflation? if so aren't we trading a crash for permanent(or at least long-scale) lower purchasing power for all consumers?
When talking of inflation we really do have to recognise that monetary expansion only causes wage/goods/services price inflation when there is too much money chasing too few things to buy. At the moment, the real markets are all over the place but it looks like there is huge physical production capacity which is idling. Inflation risk through demand is low.
It is quite hard to have inflation without either near full employment (can't hire workers without increasing wages) or forex problems (foreigners stop wanting dollars which seems .. unlikey)
What this is mostly doing is stopping a huge property crash. Maybe that's overdue, but it would also mean ruining the retirement of a lot of the middle class.
Re: Margin calls on mortgage lenders at unprecedented levels
#20Is anyone of the impression that houses should NOT be purchased by companies like Zillow, Redfin, and Berkshire Hathaway? After 2008, if the government had allowed the housing market to actually be a market, then we wouldn’t have the housing crisis of today. Instead, corporations with access to cheap money, spent billions to buy distressed houses on the cheap, and held it for a few years, until it became extra profit…
That is a market. What might improve matters for actual humans is a non-market solution of some kind of rationing. Max 1 per customer, locals preferred.