Bernanke Needs To Show Leadership

This situation is Enron on steroids.

Actually go back to the S&L crisis, then Enron, then dot com crisis. stock market crash. All of these occurred because of cheap money as well as Corporate America's fraud, abuse and enriching themselves. When a CEO sell his stocks ( options) and tell the employees to buy, something is amiss. Corporate America makes these exotic loans, backdating, and other nefarious deeds to gain wealth, but when they go bad they look for the Federal Government to bail them out. Corporate Welfare.

Bernanke needs to hold Fed rates where they are and be his own man. Not a clone of Greenspan who followed the whim of Corporate America. If Bernanke lowers interest rates, what is he saying to those who played by the rules?? This bailout is akin to Amnesty for illegal aliens breaking the law to get in and stay in USA. What is given to those immigrants who did the right thing by waiting in line to be citizens??

The problem is too cheap money for Corporate America to fiddle with as in fraud, abuse, and enriching themselves. Too cheap money and lack of oversight will always result in Enron and S&L crisis. There was fraud from the borrower to the mortgage lender to the ratings firms to accounting firms. What are these CDO's worth? Who knows? Check the balance sheet of these firms. H & R, Countrywide, Bear Stearns, Moody, and many others. They don't know the value of their subprime loans and neither does the investors ( especially the investors). Enough already.

Bernanke knew coming into this job that he will get criticized from all sides. He needs to do the right thing and let the markets work out themselves ( the correction).

Look, even if Bernanke drop the rate .5% or even 1%, it will do no good. As Americans are spent out. They are indebt up to their eyeballs. They have charged out, pulled out equity from their homes, and even spent their savings.
The economy is going to slow no matter what.

Spending is over. Now we must tighten our belts and get our financial house in order.

Subprime Loans and Rising Foreclosure Fiasco

There are still major problems happening in the US real estate market with foreclosures. According to CNNMoney.com, foreclosures have jumped 90% over last year. To blame is the slowing real estate market and the subprime lending nightmares.
According to RealtyTrac, the US foreclosure rate was one foreclosure filing for every 656 U.S. households during May.
These problems, and numerous others, are encouraging the Federal Reserve to tighten up regulations to slow things down. According to CNNMoney.com, there are four areas where the government and those highly affected by these problems are focusing right now:

1. Prepayment Penalties- Where borrowers are stuck with high interest rates or fees because they can’t afford to pay the penalties involved to refinance or sell to get lower rates and fees.
Insurance and Taxes Not in Escrow- When neither of these is being paid out of escrow and money gets tight, borrowers stop paying these. Taxes get behind and insurance lapses, and the lender is left with the consequences.

2. “Stated” or “No Doc” Loan Programs- These encourage borrowers to participate in what many call “liar loans” where income and assets are exaggerated.

3. Poor Judgement on the Borrower’s Payment Ability- Because most brokers do not have to worry about what happens after closing, deals are made that should not be happening in order to make a commission.

4. Lenders have already begun tightening things up and it’s gotten harder and harder for homeowners to get a good loan on a property, never mind your average investor.

Federal Foreclosure Study

WASHINGTON, April 25 (Reuters) - Two leading members of the U.S. House of Representatives Wednesday sought a federal study of the current problems in the subprime mortgage sector and an increase in the rate of home foreclosures.
Failed loans to subprime borrowers with damaged credit have pushed up mortgage delinquency and foreclosures in recent months.

The study should examine what caused the surge in foreclosures, what communities have been hardest hit and how “the recent rise in foreclosures compare to the scope of foreclosures in previous housing downturns,” according to a letter seeking the study.
The study should also consider what regulators did to prevent the current problems and what impact “17 consecutive Federal Reserve interest rate increases had on borrowers with adjustable rate mortgages,” the letter states.

The report was requested by Rep. Barney Frank, chairman of the House Financial Services Committee and the top-ranking Republican on the panel, Spencer Bachus of Alabama.
The Government Accountability Office, a non-partisan research agency, typically fulfills such requests that come jointly from leading Democrats and Republicans.

Frank, a Massachusettes Democrat, and Bachus wrote that they are “developing workable solutions to the current problems in the subprime mortgage market… and our Committee will be considering legislation on the subject in the coming months.”


I am not surprised of the rising interest rate during that time. The Federal Reserve was complicit in the subprime mortgage collapse. The Federal Reserve was trying to get more "profits" to the banking industry. The only problem the Federal Reserve didnt know where the line of collapse factor or the Federal Rserve chose to ignore it.

Squeeze as much out of the little guy as possible to get more profits to the banks and the top 1% of the rich rich folks in America. So much of what the Federal Reserve has done is so much like the ways of the Bush Administration.