Buying and Selling: Short-Term Memory

"I know NAAAA-THEEENG...."

That's the shorter version of this discussion about Bernanke's reluctance to influence policy. If Greenspan had possessed Bernanke's reticence, we might not be sitting on the pressure-cooker we are today. Ironically, it may very well take a more active Fed chair to rein in spending and counsel against continuing to flood the market with cheap dollars. Is "Helicopter Ben" up to the task? Doesn't sound like it.

"How to Ride a Housing Bubble?" This's funny as hell, not least because the article, much like the topic it discusses, has been very obviously scrubbed from the public memory. C'mon, Business Week, keep the propaganda straight!

Ok, here we go. I think I liked the scrubbed version better. Money quotes:

Last year pay-option ARMs made up 99% of Golden West's loan pool. (It also offers home-equity lines of credit.) And 62% of the loans were secured by homes in California, where housing prices could fall in coming years.

But Golden West's risk management is among the best in the industry. Its annual default rate has been lower than that of its peers for years. Golden West maintains a higher-than-average percentage of assets in cash to cover losses. And the Sandlers don't lend to the riskiest borrowers with spotty credit histories.

Does this make sense to you? 99%--that is, nearly ALL--of their pool is in negative-option ARMs, over half of which is in California, the bellwether for overpriced, no-document-craze markets if ever there was one. And yet they don't make shifty loans?

Boom and bust, baby. It's the way of the world. Unfortunately, the idol of this age happens to be none other than Leonard Shelby, as in the guy from "Memento" who kept doing things over and over again because he had no ability to make new memories.

A better metaphor for the housing market--and the market as a whole--could not be found if I tried.

Posted at February 21, 2006 12:07 AM

digg this story

Trackback Pings

TrackBack URL for this entry:
http://weblog.housing.com/cgi-bin/mt/mt-tb.cgi/125

"I know NAAAA-THEEENG...." That's the shorter version of this discussion about Bernanke's reluctance to influence policy. If Greenspan had possessed Bernanke's reticence, we might not be sitting on the pressure-cooker we are today. Ironically, it may very well take a more active Fed chair to rein in spending and counsel against continuing to flood the market with cheap dollars. Is "Helicopter Ben" up to the task? Doesn't sound like it. "How to Ride a Housing Bubble?" This's funny as hell, not least because the article, much like the topic it discusses, has been very obviously scrubbed from the public memory. C'mon, Business Week, keep the propaganda straight! Ok, here we go. I think I liked the scrubbed version better. Money quotes: Last year pay-option ARMs made up 99% of Golden West's loan pool. (It also offers home-equity lines of credit.) And 62% of the loans were secured by homes in California, where housing prices could fall in coming years. But Golden West's risk management is among the best in the industry. Its annual default rate has been lower than that of its peers for years. Golden West maintains a higher-than-average percentage of assets in cash to cover losses. And the Sandlers don't lend to the riskiest borrowers with spotty credit histories. Does this make sense to you? 99%--that is, nearly ALL--of their pool is in negative-option ARMs, over half of which is in California, the bellwether for overpriced, no-document-craze markets if ever there was one. And yet they don't make shifty loans? Boom and bust, baby. It's the way of the world. Unfortunately, the idol of this age happens to be none other than Leonard Shelby, as in the guy from "Memento" who kept doing things over and over again because he had no ability to make new memories. A better metaphor for the housing market--and the market as a whole--could not be found if I tried.