Thursday, November 10, 2005

Low Rates Set Up Homeowners For Default

This op-ed piece for the Hill suggests who should get the credit for the coming foreclosures. "My opinion..is..that it’s not (Alan Greenspans) sluggish pace of quarter-point increases that is hurting this economy but rather that he hasn’t raised rates fast or far enough. On his waning watch, the past several years of dirt-cheap money have resulted in a potential perfect economic storm that could send this country into a tailspin of the type not seen since Black Thursday 75 years ago."

"In a frenzy, Americans have taken on more personal debt than at any time in this country’s history, the lion’s share being home mortgages. Many of these loans appear to be of the sleight-of-hand variety such as interest only, negative amortization or 110 percent financing. Even the grifters have come out of the woodwork, with estimates that upwards of one out of 10 home mortgages has fraudulent components attached to it."

"I’m not sure how this financial dinosaur sees the world anymore. After encouraging casual and, at times, reckless borrowing, he suddenly raises a muted alarm about Americans’ not saving enough. You can’t have it both ways. The reality is, what is the incentive to save? A 2 or 3-percent return at a bank? A crapshoot in the stock market? A risky investment in a preconstruction real-estate deal?"

"The last element in this perfect storm is personal bankruptcies. In fact, cracks are already beginning to appear. The American Bankers Association recently reported that the percentage of past-due credit-card accounts has reached an all-time high."

1 Comments:

At 2:39 PM, Blogger Chip said...

"...it’s not his sluggish pace of quarter-point increases that is hurting this economy but rather that he hasn’t raised rates fast or far enough..."

Huh? I guess it's way too late in the evening for me to understand this one. It's not that he was too slow in raising rates, it's that he wasn't fast enough. Is this Oz?

 

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