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To: Freedom Fighter who wrote (218210)	2/1/2003 10:18:42 AM
From: yard_man	Read Replies (1) \| Respond to of 436258

Wayne, I don't care if he is triple counting -- the accumulation of debt remains exponential and it IS a virtuous circle -- with ever greater sized loans at low rates stimulating unsustainable rises in price which justify more money being loaned. It is a bubble and Noland is right that Japan was in different shape and had some options for dealing with the aftermath that we don't ... you can talk about degrees, but you can't reasonably argue that there hasn't been the kind of exponential growth of debt he is talking about. Granted, sale of one debt to another is not two debts, but if through acquisition of the "debt" someone counts that as an asset (i.e. an income stream) and lends out more on that basis...

To: Freedom Fighter who wrote (218210)	2/1/2003 10:25:41 AM
From: orkrious	Respond to of 436258

Tippit said it perfectly

To: Freedom Fighter who wrote (218210)	2/1/2003 11:07:39 AM
From: Ken98	Read Replies (1) \| Respond to of 436258

Wayne, have you considered the $1 Trillion+ in loan guarantys and credit enhancements issued by the GSEs, primarily Fannie for apartment loans, in you analysis? They have little or no loss reserves for the credit enhancements and book the "fees" straight to income quarterly. With apartment vacancies rising in most markets, this is the real hidden danger that lurks just below the surface for the GSEs. Heck, if you just apply a normal, recessionary default ratio onto that guaranty portfolio it boggles the mind. The other systemic problem I see with the GSEs is that if they were to even merely slow down their rate of growth, it would have a profound impact on housing prices on the ground. I seriously doubt that most banks would lend their "own" money on these 100% LTV, non-documentable income, no-underwriting, lame ass schemes, without which most of the homies would lose the majority of their customer base.

To: Freedom Fighter who wrote (218210)	2/1/2003 3:44:09 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 436258

Wayne, Here is where your logic breaks down: If I borrow $10 from a bank, the bank now carries an asset of $10. On which it can play $100 of derivatives for a 10% margin. So, by leveraging their assets, they are much larger risk than my $10 would lead you to suppose. As long as they win on the derivative trade, they are in fine shape. But if I default at the same time the derivatives run agains them, even in a minor way, hello Great Depression. Now, just to throw gasoline on this fire, I'm a much better credit than the great majority of bank loans.