61–70 of 152 posts
Earlier quoted context omitted.
Why does Alan Greenspan's opinion have any weight? He is not in any kind of position to have control over rates.
No, but since he worked in that position for years, he might have some kind of insight?
The last crisis was also heavily related to sub-prime mortgages. How much has sub-prime lending been mitigated? Before the last crash, you could get "no paperwork" mortgages, you'd just to have a little higher interest rate. Lenders would also squeeze people into ARMs so their initial rates were really low and then would go up after the adjustment period. And nobody cared about things like PMI because prices were goi…
Plenty of people with excellent credit scores spent too much money on a house and ended up defaulting, and even people who could afford the payments ended up severely underwater; houses became very expensive very quickly, you couldn't buy one without spending too much.
Blaming subprime is largely a right-wing narrative. The worst thing that happened in subprime is that a lot of people (especially minorities) who could have qualified for mortgages on better terms were steered into subprime and ARMs because of their worth in high-growth (and ostensibly low-risk) CDOs.
To sum it up, despite there being regulations on CDOs the real problem still exists. That problem is that loans are easy to get the gov stamp. Thos makes it easy for new home owners to get loans. And this makes it easy for sales people to sell the loans. Much of this opinion article is based on an other article [0] which seems less doom and gloom and more about the shift to a majority of state sponsored loans. This i…
Why does the government need to be involved in mortgage lending at all? Is there a specific market failure inherent in it people can point to that calls for government intervention to overcome (akin to the public good failure for e.g. roads)?
The last crisis was also heavily related to sub-prime mortgages. How much has sub-prime lending been mitigated? Before the last crash, you could get "no paperwork" mortgages, you'd just to have a little higher interest rate. Lenders would also squeeze people into ARMs so their initial rates were really low and then would go up after the adjustment period. And nobody cared about things like PMI because prices were goi…
As far as I know, the last crisis wasn't heavily related to sub-prime mortgages. The primary predictors of default were the amount of money down and the numeracy of the borrower, not the borrower's credit score. Plenty of people with excellent credit scores spent too much money on a house and ended up defaulting, and even people who could afford the payments ended up severely underwater; houses became very expensive…
To sum it up, despite there being regulations on CDOs the real problem still exists. That problem is that loans are easy to get the gov stamp. Thos makes it easy for new home owners to get loans. And this makes it easy for sales people to sell the loans. Much of this opinion article is based on an other article [0] which seems less doom and gloom and more about the shift to a majority of state sponsored loans. This i…
Why does the government need to be involved in mortgage lending at all? Is there a specific market failure inherent in it people can point to that calls for government intervention to overcome (akin to the public good failure for e.g. roads)?
> Partly because the state charges too little for the guarantees it offers, taxpayers are subsidising housing borrowers to the tune of up to $150 billion a year, or 1% of GDP. The current environment offers housing borrowers money at a price below the market. The simplest bet with this cash (buying a house and holding) has probably been overdone in the market. House prices are quite high now. Still, small but crafty…
The simplest approach would be ... The nationalised mortgage firms that guarantee the bonds ... should be forced to raise their capital buffers and increase their fees Raising capital requirements seems like a minor tweak, a band-aid cure. I would argue that the systemic risk could better be managed by changing the fundamental economics of the financial instrument in question: the classic residential mortgage. I'm su…
Earlier quoted context omitted.
Why does the government need to be involved in mortgage lending at all? Is there a specific market failure inherent in it people can point to that calls for government intervention to overcome (akin to the public good failure for e.g. roads)?
When these institutions were first created no one imagined the harm they would inevitably cause. Now that they exist they can't be killed, because they help some people. Like a lot of things, really.
I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs. The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount…
Pretty much everyone is saying that interest rates are going up in the US and are going to go up soon. Alan Greenspan just came out today saying people are going to be surprised how quickly they go up.
I wouldn't say that.
According to Bloomberg's interest rate predictor the probability of a hike before the end of the year, ie the definition of soon, is less than 50%.
Even if you go out to the end of 2017 you still only get to 67% probability of a fed hike. And 67% is a far cry from "pretty much everyone".
And even with all of that, the most predicted rate hike is a minuscule 0.25% to 0.5%.
Now, I agree that this is all up for debate and markets can definitely get this wrong, but I stand by my assertion that low rates are here to stay. I really don't think the years of 5-8% rates are coming back any time soon.
But I'm always willing to change my mind if someone can convince me, so back to you.....What makes you think that this era of low rates is going to end?
To sum it up, despite there being regulations on CDOs the real problem still exists. That problem is that loans are easy to get the gov stamp. Thos makes it easy for new home owners to get loans. And this makes it easy for sales people to sell the loans. Much of this opinion article is based on an other article [0] which seems less doom and gloom and more about the shift to a majority of state sponsored loans. This i…
Why does the government need to be involved in mortgage lending at all? Is there a specific market failure inherent in it people can point to that calls for government intervention to overcome (akin to the public good failure for e.g. roads)?
I think that's how the story is supposed to go.
I guess the flip side is that quote by that fellow I read somewhere that went something like: democracy cannot last as a permanent form of government, it can last only until people realise they can vote themselves largess from the public purse.
Let's wait and see what happens.