Posted by: Marshall Sponder | February 23, 2008

A Picture (or chart) is worth a Thousand Words

There’s a story in the New York Times today about A ‘Moral Hazard’ for a Housing Bailout: Sorting the Victims From Those Who Volunteered where the Banking Industry is now thinking about the unthinkable – a large rescue program for homeowners that are stuck with Sub-Prime Mortgage loans on houses that are worth less than what they were originally bought for.

“…. But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives for an epic government rescue plan is suddenly coming into fashion.

A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.

The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.

To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.”

And now, look at this picture – what does it tell you?

I see a high correlation between Sub-Prime Mortgages and “bailout”.

What do the dates of September 1st, December 6th or 7th and January 20th-21st all have in common? Was the FED meeting at those times?

Don’t know – but if you look at what people were saying (writing) in early December (when we had the highest peak of traffic), he’s  what you’ll see:

Wonder what Paul Krugman is going to write about this story (he probably has written something on the bailout recently).


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