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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (108558)	3/8/2008 8:13:15 PM
From: Hawkmoon	Respond to of 306849

You seemed to have missed low interest rates gifted by the Fed on the populace. Not at all.. you can have low interest rates, but tight lending practices.. If I'm not mistaken, I believe they existed in the early '60s. But you were expected to have a significant downpayment to put up in order to qualify for a loan.. Margin rates are also "low" in the equities markets.. but brokerages can hike their maintenance requirements as a hedge against abusive lending practices. We're already seeing common-sense coming back to mortgage lending.. And, of course, it doesn't hurt the banks that the Fed is providing additional "cushion" by permitting them to borrow at far cheaper rates than they will lend to you or I.. So I think, even if the Fed lowers rates another 1.0%, the demand for money, and the "renewed" recognition of proper risk management policies by banks (since they will now have to keep those loans on their books) will restore some balance. But, frankly, I'm not sure how much carnage is going to take place until that happens. But I think we're starting to get to the point where the baby is getting thrown out with the bath water when govt' guaranteed AAA bonds are being dumped. That's going to require the Fed taking on those loans, as they have previously injected liquidity into the markets via treasury bonds. In essence, FannieMaes and GinnieMaes are going to become the equivalent of government debt for the purpose of injecting liquidity into the financial system.. And this is is because it would be counterproductive for the Fed to continue to rely upon the Treasury markets for that purpose. Hawk