The Bubble That Could Not Last, Who Will Pay, Who Will Be Bailed Out?

     As readers of this blog know, the Greenspan bubble that led to the sub-prime crisis was not a secret.

Of course, Chairman Al is not out of excuses.  I think we should all adopt one of them, the “I got a hand-written exoneration note, after the public criticism, from the guy who is now dead” line is priceless.

As the linked to LA Times article says, the client drives the process.  Those in the mortgage market extracted the quick buck and passed the garbage up the line, where it has been hitting the fan since last summer.

“The problem is that banks weren’t doing their due diligence” as the section chief of the FBI’s Economics Crimes Unit says in ABC online about holding accountable some of the bad guys who caused the sub-prime crisis.     More bad guys are being chased by those supposed arch enemy’s of society, the trial lawyers.

Class action suits are starting to be filed on behalf of investors who are getting nailed by plummeting stock prices roughly co-related to the amount of sub-prime mortgage crap in the portfolios.  This is the next step up in the largely questionable, frequently fraudulent, sub-prime mortgage security market.

Another consequence, the pendulum always swings too far back the other way, and now lending standards appear to be too strict, entire zip codes being excluded.  The entire state of Michigan has been designated off limits by some underwriters.

Bear-Stearns is bailed out under the sponsorship of the Federal Reserve.  The mortgage industry, its insurers, and so on, scream for federal bailouts.

My clients are not too big to fail, and their screams are not always audible to those in power.

There is bankruptcy reform legislation pending in the House and the Senate.

Let your voice be heard, this reform will help property values everywhere, and costs the taxpayer NOTHING.

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