mortgage market

Comments from the real world

by Julie Walsh on November 11, 2008 · 1 comment

in Bailout Watch, Economy

Here’s some insightful comments from Thomas Haynes, a friend of CEI’s:

There’s a very interesting debate that could be conducted on who’s the madam, who’s the john and who’s the pimp in the relationships between the executive branch, the legislative branch and the financial services industry, but only so much of that debate can take place on Internet.

I did, however, want to note to those involved in the debate over TARP that my experience as a borrrower, plus some candid comments from bankers, make it crystal clear that these public funds are not being deployed for the stated public purpose of making credit more available and more affordable and thus stimulating (or resuscitating) economic activity.  The credit markets that we tapped were both flowing and reasonably priced shortly before the bailout bill. They continue to flow now, but they are no longer priced as reasonably.  Credit spreads over benchmarks (LIBOR being the most relevant) have widened by 150 basis points since late September.  Every banker I’ve spoken too  confirms this, citing supply demand and cost of money factors.  When you question the cost of money component, however, they begin to stammer once your make the point that either LIBOR or the fed funds rate, or some combination of the two, should be very precise indicators of the cost of funds for big banks.

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“One of The Great Success Stories of All Time”

by Iain Murray on October 16, 2008 · 3 comments

in Bailout Watch, Economy

While conservatives are angry about a number of things at the moment, they should be at least as angry that the Congressional Democrats who helped stoke the mortgage crisis are getting away with blaming everyone else for it. Today, Senator Chris Dodd, the prime recipient of GSE lobbying funds and proud holder of a sweetheart mortgage from Countrywide, is holding hearings where the witnesses will blame everyone but Dodd, Barney Frank and their cronies. Republicans asked to invite witnesses but were barred from doing so. The Wall Street Journal has more:

In February 2004, while Republican colleagues warned of the systemic risks posed by Fannie Mae and Freddie Mac, Mr. Dodd pronounced the mortgage market “one of the great success stories of all time.” A year later, the Connecticut Democrat voted against a reform that would have limited the size of Fan and Fred’s mortgage portfolios…At today’s hearing, his mission is to weave a tale that somehow manages to avoid mentioning his own role in this debacle. That won’t be easy, but Mr. Dodd has shrewdly selected a series of witnesses who, like him, contributed to the mess, and have every incentive to point fingers elsewhere.

Read the whole thing for details of the ridiculous witnesses and a strong suggestion for who should be called. Meanwhile, in The Washington Post, Peter Schiff has a good outline of how government – and the actions of Bill Clinton – really did help cause this mess and is probably now making it worse:

Yes, many Wall Street leaders were irresponsible, and they should pay. But they were playing the distorted hand dealt them by government policies. Our leaders irrationally promoted home-buying, discouraged savings, and recklessly encouraged borrowing and lending, which together undermined our markets…By refusing to allow market forces to rein in excess spending, liquidate bad investments, replenish depleted savings, fund capital investment and help workers transition from the service sector to the manufacturing sector, government is resisting the cure while exacerbating the disease.

There’s actually a school of thought that this decade is paralleling the 1930s quite closely (see the Oct 7 edition of The Short View, about 2 minutes in) and that we’re in the thick of something that actually began in 2000 or so. Over in Britain, Gordon Brown has apparently decided that increased public spending is necessary. The 1930s all over again, indeed. We need to get angry about the wool Chris Dodd and co are pulling over our eyes.