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To: Paul Kern who wrote (71540)	1/21/2009 6:27:14 PM
From: Keith Feral	Respond to of 118717

That's how the securitization should work. Take MBS with 2 or 3 years to maturity, buy them out and use the capital for new loans. The FED has a good idea to start laddering MBS securities with near term maturities to buy up loans with little to no credit risk in order to get the banks lending new money. It doesn't even cost the banks very much since most of the interest payments have already been made by the last years of the amortization table. Greenspan's whole way of doing business was working against the banks. Bernanke seems to be the first FED Chairman to fully understand the sensitivity of housing prices. We need monetary policy that promotes stable household formation, as opposed to all the risk spreading crap with CDS. However, that worked pretty well too since international banks are carrying half of the bad loans for US mortgages. I have yet to see any US bank talk about losses from European mortgages. RBS is still puking out bad loans from the US and they haven't gotten to the bottom of their own housing bubble. Looks to me like Europe is where the US was at the beginning of 2008. Meanwhile, the US appears to be finally generating a recovery for housing demand in response to the firesale prices in some areas like Southern California. Pcyhuang had an interesting article on his thread. Message 25337428