We have not seen a nationwide decline in housing like this since the Great Depression," said Wells Fargo Chief Executive John Stumpf.
What do you say? It's ugly and getting uglier.
I do believe he's exaggerating when he makes the statement above; however, I continue to be disturbed by the con job employed to package and sell these loans, and stunned by the naivete and stupidity of the acquirers. The fact that some of these loans don't even have title on the property.......loans that are supposed to be collateralized........is the icing on the cake. What kind of squirrelly biz practices are these? I can't even begin to get my mind around such flagrant stupidity.
Consequently, its not the housing bust that has me worried......I still don't think its as horrible as the media is making out. What's blowing me away is the way these loans were packaged and sold to banks by their originators; the lack of DD that was done when acquiring the loans. Its clear that places like Etrade didn't even have the wherewithal to evaluate what they were getting.
Why I am particularly exasperated is because its speaks to the very heart of what the companies I worked for did. They would acquire a CDO of apt loans........sometimes 50-60 buildings in a package. Then we would sit in a conference room and go through each file to determine the quality of the documentation.....someone from accounting; another from mgment, still another from legal etc. We each had a checklist to determine if the files were intact.
Clearly, none of that was done....by the banks, by Etrade, by most everyone buying these loans. Consequently, no one...absolutely no one....knows how bad the situation is; how much money is at stake. And apparently, few banks are willing and/or able to sit down and do the DD I describe above in order to determine what they have. Instead, they keep allocating more and more money to cover the losses. Its nuts! And because they don't know what's happening, no one knows exactly how bad the situation is. Hence, the two buzz words now prominent on the lips of Wall Streeters are bankruptcy and recession; neither of which are good for the stock market.
I am not sure I have conveyed the utter stupidity of this mess.....but think FEMA after Hurricane Katrina. That stupid!
And don't even get me started on lending to people with 450 credit scores, requiring no money down and providing ARM loans whose future payments they could not possibly meet. |
