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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (7571)	9/28/2002 1:34:57 PM
From: orkrious	Read Replies (1) \| Respond to of 89467

another great Credit Bubble Bulletin from Noland prudentbear.com excerpt: LTCM was a systemic issue only as long as it was not resolved by Fed rate cuts, massive GSE liquidity creation, and Fed intervention to place the hedge fund’s holdings in strong hands. Fannie is a critical player in an enormous mortgage finance Bubble that is today at acute risk. Adding insult to injury, Fannie’s “risk” problem is but part of the unfolding systemic “risk” dislocation. This Bubble is being threatened by financial dislocation (the systemic difficulties from massive mortgage refinancings) and growing Credit problems at the fringes of consumer finance. The already arduous task of hedging in this extraordinary environment is compounded by the cancerous impairment of key players throughout “Speculative Finance.” Importantly, lower interest rates only exacerbate the financial dislocation (causing more self-reinforcing market trading dynamics); additional marketplace liquidity only exacerbates financial dislocation (as this liquidity chases the Treasury market melt-up). Moreover, the mortgage finance super-industry must maintain unprecedented mortgage Credit growth to sustain levitated real estate values, not to mention boom-time over-consumption. To top it all off – and this will surely prove to be the most critical issue – this speculative blow-off of mortgage finance excess is inundating an impaired financial system with extraordinarily weak Credits, while it pushes an extremely maladjusted economy to previously unthinkable vulnerability. And on the surface it looks ok to most and pretty good to many. This is potent brew for a financial accident.