John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: Hawkmoon who wrote (8957)	3/15/2008 10:26:52 AM
From: robert b furman	Read Replies (1) of 33421

Hi Hawk, You've just nailed it. The loan originators are a fragmented, uncertified,grou[p of small business people. Friday when Paulson spoke,he said they needed to be certified and registered,with some accountability. In the car business, if you incorrectly inflate a persons income on a credit app and it becomes a repo - you buy back the contract. This instills a penalty that is much greater than the financial gain from processing the transaction. THAT is the accountability that MUST be associated with originating a mortgage - especially if it gets diced into tranches(I think that concept is dead for now). To reinvigorate the concept - which has proven it can work - there will need to be certification and a large pool of money backing up the integrity. Enter Buffet and Ross with billions and an accontability that won't trust a stranger that decided to start up a loan origination business from a leased office and a leased Cadillac. Big pain to those in the business and the conservative banks that were being sidestepped will end up being bigger and more profitable and are really smiling as the house of cards collapses. In the end the FED will bail out the losers and roll them into the banking network (that they are really designed to defend and support). The system is working and the cancer will be sterilyzed and we will do nicely when it is all done and over. In between,it has given us some great stock prices that I don't think will stay depressed much longer. A lot of hedge funds have been killed by the carry trade as the Dollar has actually dropped below the yen,the Australian Dollar and any other carry trade currency. The carry trade is where all CDO money went. it appears with 30-40 leverage. Once again the investment bankers are where all the hedge fund action went.It's where all the CDO fees stayed in house and we'll see next week where Lehman,Goldman,and others do/are. Bear Stearns was the biggest - no doubt on that - now to see if there are more cock roaches out there. Bob

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