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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (74328)	1/24/2000 9:57:00 AM
From: Mike M2	Respond to of 132070

Don, thanks. John Works raised the issue many months ago. I used to think that non bank credit could be inflationary just like bank credit. It does seem that the proliferation of non bank credit has contributed to the expansion of credit increasing competition for customers resulting in a decline in credit quality. mike ho ho ho

To: Don Lloyd who wrote (74328)	1/24/2000 9:59:00 AM
From: Freedom Fighter	Respond to of 132070

Don, Thanks for posting that article. I've been thinking about this subject for more than a year and that's the conclusion I came to also. What I think is happening is essentially that we are creating a chain of credit on the financial side of the economy. If a bank lends money to me (new), then I lend it to my brother, then he lends it to my sister, we have 3 credits, but only one injection of new money. The risk in this transaction is not the same as in three separate lending transactions to each of us. As long as my sister is good for it we all are good for it. In the financial system, someone is lending money to FRE and FNMA to buy mortgages from a bank. FRE and FNMA then own the mortgages. As long as the mortgage payers are good for it the chain is secure. There are two credit transactions, but they are linked by one borrower at the start of the chain. I think the debate should not be about the amount of credit but the quality of credit. In FNMA and FRE's case if should be about the quality in relation to the equity of those businesses. I think Tice and others are mistaken in their view that FRE and FNMA are creating money. They are facilitating the creation of money by banks and creating a chain of credit. Wayne