Neither tidbits, nor juicy

• Author Michael Lewis speaks to the end of Wall Street, only this time it really seems like the end. If you want the inside scoop on how the credit debacle came to be, read the whole thing - it’s a doosie, but worth the coffee break. (h/t Paul Kedrosky)
• “A Suburb Can Survive” - trading up to bigger and bigger homes, showcasing the “American Dream”, might have turned out ugly, but since you have a big yard and juvenile trees, you can still put up unobstructed solar panels and windmills, and plant yourself a garden. You can’t say that about condo dwellers, which is why I’d bet that as fuel prices gyrate, urban renewal is going to hit a brick wall.
• Virtual-machine enabler for Mac, Parallels Desktop, just got a speed boost. As a licensed Parallels user, I’m not sure I need to upgrade - the latest OS X is offers plenty for development and database analysis, and I’ve been able to shuck some software I was still hanging onto from the Windows days. In other words, I don’t need Windows or Linux as much as I use to. Nevertheless, it’s half off time for those who do have a need for speed, but you have to act fast.

And last but not least…

• Oh where, oh where has our $2 trillion gone, oh where, oh where can it be?

Adieu.

As previous noted, Paul Krugman of the New York Times tried wishing away Fannie Mae and Freddie Mac’s problems by pinning the housing crisis on sub-prime. Now the guy is contradicting himself, while claiming more informed statements are non-contradictory.

Krugman said…

Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco.

And the better informed laughed…

Fannie and Freddie had about as much to with the “explosion of high-risk lending” as they could get away with.

Considering the GSEs touch almost half of the mortgages in America, it’s quite improbable for them not to have at least minor complicity. Nonetheless, Krugman is again explaining away…this time the glaring difference of opinion - it’s not contradictory!

Well, at least he got the S&L bit right. But I wonder who he’s going to be covering for when the liar-leveraged McMansions start falling…

Data as of 1/07; compliments of the Irvine Housing Blog

Not headline news, unless you consider that we’re in the bottom of the second inning on this problem. I believe the mess extends far beyond sub-prime mortgages, despite what the mainstream media would like the sheep to believe.

UPDATE: Jim Rogers does not have a wool coat.

Sad, but true.

This is a politically expeditious course of action - portray the image of coming to the rescue even if the markets know it’s somewhat futile to interfere…

I think of the underlying game as “seek the sucker”: sucker number one is persuaded to borrow too much; sucker number two is sold the debt created by lending to sucker number one; sucker number three is the taxpayer [that's you!] who rescues the players who became rich from lending to sucker number one and selling to sucker number two.

It’s more like four or five suckers, each paying a premium to the previous for the privilege of holding an asset for a split second. And it’s profitable to do so, until the change in the market value of the collateral turns negative. Then you start playing accounting games.

The plethora of intermediaries has dispersed, so it’s easy to place the blame on them. Hold yourself out as the white knight, and score a few brownie points in the process. Unfortunately, baked goods aren’t good collateral for securitized loans.

UPDATE: Meanwhile, this isn’t going to help matters, but I’m sure the resulting spin will be fun hearing. At least government workers won’t take pay cuts (even if everyone else does).

Gain-on-sale accounting rules are a mess, but I wouldn’t blame them for all the sub-prime mortgage woes. Around here, unchecked greed combined with the floating consensus that if you don’t have 5,000 square feet and granite countertops (even if they’re the low-end tiled kind) you just aren’t human, comes to mind first.

Nevertheless, I loved the headline: Subprime Mess Fueled by Crack Cocaine Accounting.

Maybe it’s all a ruse to make people think accounting is a thrilling, risky, gang-in-streets profession?

I was hard pressed to call it a debacle, but I couldn’t think of a better word. Still, when I think about it I keep hearing Resolution Trust Corporation bells in my ears. Steve Berger says:

Let contractual arrangements remain in force, let good lenders prosper and bad ones suffer (similarly with borrowers) and let the taxpayers’ pockets go unpicked. Legislative interference with market processes is likely only to prolong and deepen the downturn.

I concur, but legislators only know how to legislate. Look at the bright side…if government steps in, institutions will have less need to raise rates.

Mortgage News Daily ran an informative story a few days back on the growing scam of mortgage phishing. The scammers send out emails offering low rate, low fee refinancing and debt consolidation loans, and use the standard “even if your credit is bad” language. This an especially dangerous situation, and likely is going to be an especially effective one as well. There are several reasons for this…

First, offers for low-rate, fee-free, and built for previously bankrupt borrowers, are a dime a dozen. I get five a day, and I bank with only one company for everything, and have been with them almost a decade. Second, there are so many lenders out there, from money center banks down to one-man loan brokerage shops, it is getting more difficult to determine who is who. Third, and likely the scariest piece, someone looking hard at a loan offer is going to expect having to give up a decent supply of their personal information. Last but not least, many of the people who fall for the gag are likely not in the financial position to bear the brunt of a drained checking account.

I suspect we are going to see a lot more of this. Don’t be surprised if this phish makes its way into the payday loan, rent-to-own, and other sub-prime scenarios.

You can read the entire story here: Mortgage Phishing, SPAM, and Email Scams.