Lew Ranieri, the man who built the market for mortgage securities in the 1980s (and proud member of TIME’s list of 25 People to Blame for the Financial Crisis), was very early in predicting that subprime mortgage lending was going to result in a really big mess. I first heard of about his gloomy views on the subject in 2007, but Michael Milken—who is moderating a panel with Ranieri on it right now at his annual hoedown in Beverly Hills—says Ranieri began sounding warnings in 2005.
Well, Ranieri is warning no more:
I’m actually very enthusiastic about housing. I haven’t said that in five years. … Not only are we within shouting distance of a bottom, we are standing at beginning of an amazing brave new world. … Affordability has never been this good.
The Federal Reserve’s efforts to keep mortgage rates below 5% (by buying lots of mortgages) and the Obama administration’s mortgage refinancing plans are together going to succeed in putting American consumer finances back in order, Ranieri says.
What you’re doing is creating one of the greatest wealth transfers we’ve ever seen. … A large portion of consumer wealth that was destroyed by the housing collapse is being reset … at the cost of bondholders, at the cost of taxpayers.
The impact of all of this isn’t going to be felt overnight, but Ranieri thinks we’re all being too impatient:
We’re just not paying attention to how good this is… Everybody moans and groans about the TALF. But the TALF has worked. The TALF punched through and saved securitization…. The system doesn’t fix itself overnight. You’ve got to give it time.
Update: It’s all on video, in case you’re interested (let me know if I got any of the quotes wrong).
