Re: OT: The politics of "change"

Richard Henry wrote:

"Paul Hovnanian P.E." <paul@xxxxxxxxxxxxx> wrote in message
news:478814D8.60C76A15@xxxxxxxxxxxxxxxx
Jim Thompson wrote:

On Fri, 11 Jan 2008 10:20:12 -0800, "Paul Hovnanian P.E."
<paulh@xxxxxxxxxx> wrote:

Jim Thompson wrote:

On Fri, 11 Jan 2008 01:07:34 -0800, Robert Baer
<robertbaer@xxxxxxxxxxxx> wrote:

[snip]

But...the US recently pumped many billions of dollars to keep
scumbags like CountryWide alive...

Except you don't know what you are talking about.

CountryWide didn't get caught with sub-prime mortgages, they got hurt
by the general slide of housing prices.

Not quite. Low house prices, by themselves, should boost the market.

Nope, House valued at $300K last year and mortgaged for $270K, fell in
value this year down to $240K, then the owner got laid off because his
JOB was moved to China :-(

Why did it drop to $240K? House prices depend on how large a monthly
payment the borrower can make. Jack up mortgage interest rats and the
affordable price goes down until the payment is the same. Unemployment
has only begun to go up and then only slightly. The mortgage crunch hit
6 months earlier.

Somebody needs to teach the Fed that raising interest rates controls
inflation only when that inflation is due to a bloated money supply. If
inflation is caused by higher commodity prices, higher interest rates
just squeeze the consumer. The consumer stops spending (and walks away
from a larger house payment) and we get a recession.

Then there were ARM's, but I don't think CountryWide plays in that
market.

Everybody played in that market. But then there's playing and playing.
The crooked lenders signed people up for big loans with teaser rates
knowing that they'd never make the payments at the market rate.

The lenders assumed, based on recent past history, that they would still
have their investment intact after they repossessed the house. The
borrowers assumed, based on recent past history, that if they could no
longer afford the payments, that they would be able to flip the house
quickly and still make money.

Both of these depend on ther being a healthy housing market. When
sub-prime borrowers were effectively kicked out, it contracted. From
that point on, its just supply an demand. Prices have to go down.

--
Paul Hovnanian paul@xxxxxxxxxxxxx
-----------------------------------------------------------------------
Procrastinators: The leaders for tomorrow.
.

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