You Can Borrow For Less Than Greece

We have an odd juxtaposition to consider today. The mortgage rate on conforming 30- year mortgages is around 5%, according to Bankrate.com. Meanwhile, at the sale of Greek seven-year notes yesterday the yield was set at 5.9%. I should note, too, that even at 5.9% (the coupon rate), investors were not rushing to buy. So what state of the world puts a working stiff somewhere in New Jersey or Calfornia or Texas worthy of a mortgage at just 5% when Greece, a sovereign nation and a member of the European Union, is seen as a less worthy borrower and told to pay more? It’s either time to start citing catchy verses from The Second Coming or it’s time to pull back on some of the generous guarantees on U.S. home mortgages.

As we have seen from the disasters known as Fannie and Freddie, home mortgage guarantees are not a risk-free business, and putting the full faith and credit of the United States behind such institutions (true it’s just implicit–but it’s no less expensive) is a largess that American taxpayers should begin to rethink. Such guarantees enable more home ownership but as we have seen over the past two years, homeownership can bring as much heartache as happiness, so why subsidize it to such a great extent? Others may argue that government guarantees are critical to the securitization of mortgages. Now, we all know where securitization got us.

I don’t know if Treasury secretary Geithner was comparing Greek bonds and U.S. mortgage rates today, but he was clearly thinking about some of the related issues. Here is a snippet from his testimony today before the House Financial Services Committee on the issue of Fannie and Freddie (the GSEs):

The performance of the GSEs was symptomatic of this larger regulatory and oversight failure. They were allowed to earn private gains for many years, but ultimately the taxpayer subsidized their losses. They were allowed to expand and manage their investment portfolios without regard to the risk they posed to the system. Over time, the GSEs were permitted to guarantee riskier mortgages and mortgage-backed securities. They were not required to hold adequate capital and employed inadequate risk management. The housing finance system clearly cannot continue to operate as it has in the past. A broad reform process of the housing finance system must be undertaken to achieve comprehensive and effective reform that delivers a more stable housing market with stronger regulation, more effective consumer protections and a clearer role of government with less risk borne by the American taxpayer. Where guarantees or support is provided, it will be explicit and priced appropriately. There will be no ambiguity over the status or allowable activities of any private entity which enjoys any benefits or protections from the government.

Small Dairies Go Under as Milk Prices Sink Again

PLAINFIELD, Vt. — The MacLaren brothers are third-generation dairy farmers, but they will likely be the last in their family.

After working all their lives on the hillside farm in Vermont that their grandfather bought in 1939, rising to milk cows at 3 a.m., even in blizzards and sub-zero temperatures, they decided to call it quits, auctioning off their roughly 200 cows and equipment ranging from stalls and hoof trimmers to tractors and steel pails.

The Term “Pink Collar” Is Silly And Outdated — Let’s Retire It

You can’t throw a stone around the internet today (if that’s even possible?) without running into the New York Times’ new study on so-called “pink-collar jobs.” The report found that over the last decade more and more men have flocked to traditionally female-dominated career fields like nursing and teaching. Fascinatingly, the study disproves the commonly held belief that this transition is the result of the recession, proving that men’s migration into the pink isn’t out of some alleged desperation. Men want those jobs.

http://www.124monkeys.com Sean DeCoursey forgot his password

You almost have a point here, but leaving out the fact that Greece’s debt costs have been artificially inflated by Wall Street firms betting heavily on its failure kinda makes this post into fail.
pneogy

“As we have seen from the disasters known as Fannie and Freddie, home mortgage guarantees are not a risk-free business,….”

I wish you would acknowledge, as Geithner does, that the GSE’s current situation is (1) part of a much larger industry-wide problem, and (2) directly related to the Fed using them as a vehicle for providing huge amounts of liquidity and preventing the total collapse of the housing market.
deconstructiva

The quality of the original mortgages – or lack of – was the initial problem. Borrowing too much for too-big homes vs. what subprimers could really afford kinda got left by the wayside …let alone chopping crappy mortgages into pieces and selling them. Who owns the notes now, if anyone? Then there are those derivatives, but I digress.
ps56penn62pr64

Privately owned central banking systems are the root causes of the economic crisis in the world — including Greece.

How many times dose this 17th century banking system have to fail before people recognize it for the racket that it is and chuck the whole thing?

Their concept is simple. The fractional reserve banking system is like a scam where I hire you to paint a house that I don’t have and sue you for breach of contract when you can’t complete the job.

These monetary systems are based of factional-reserve lending procedures, banks creating the worlds money supply out of nothing, money issued into the economy as the principal of loans, loan that must be repaid with interest, interest that does not exist because it is not created by anyone, resulting in loan contracts that are impossible to fulfill when they viewed as an aggregate whole. By foreclosing these impossible loan contracts, privately owned central banking systems reveal themselves to be inventions designed to take people’s stuff.

Ask yourself. How is it that working people who make all the stuff in the real world are in such great debt to bankers who only manage the money that represents this real value? The bank does not provide a single board nor drive a nail in the building of a house, and yet, it is often paid more that the price of the house for simply providing credit thought bookkeeping.
waltwriston

Those GSE’s were put into place to make loans more affordable and enrich the private banking sector. It really gets my goad that it was all FRE and FNM’s fault yes they bought overrated MBS and the like but that too was for the banks and not to make private profits and I don’t see a conflict of interest in doing so. To take quote from Marx “With the development of interest-bearing capital and the credit system, all capital seems to be duplicated, and at some points triplicated, by the various ways in which the same capital, or even the same claim, appears in various hands in different guises.” This is his discourse on fictitious capital. Which applies to CDO’s and the like it’s my understanding that there’s no limit on how time a CDO can be duplicated CDO –> CDO^2 –> CDO^3….CDO^n on to infinity. And all of that housing wealth that “evaporated” is also fictitious capital. Sorry to go off tangent here but I think this is an esp. important concept for people to try to grasp.