Related to this I’ve been realizing that even though I’m in the market for a home and my purchasing power will decrease as a result, in the long run higher mortgage rates are a good thing.

Ron Paul is also right- we are addicted to easy money, and while the remedy is painful the alternate is that the patient will eventually die.

Sure, yields should rise because the ability of the taxpayers to ever come close to repaying the debt is in question (interest on the debt is what, 19% of federal spending now?). But if F&F are nationalized (don’t get me wrong, I abhor the thought), existing mortgages should trade right at treasury yields (which ought to spike). And yes, the creation/purchase of new mortgages by the government comes very much into question (we should all finance each other’s mortgages???), but I just don’t think McCain’s comment holds water.

And I don’t know that households will or won’t renew their mortgages, especially if they are looking at a non-government-backed rate on the “new” mortgage.

Let’s get housing prices back to sane levels, and then private finance will come back into the picture.

The simple story is that the present crisis has destroyed the illusion that Congress could be responsible for $5 trillion of more-or-less shaky assets without carrying same on their books. The farce of pseudo-privatizing (and cloning) Fannie during the Nixon years simply created an off-balance-sheet vehicle that is now being consolidated. So that $800 billion raise to the debt ceiling Congress has sneaked into the bailout bill is actually more than six times too small.

The disambiguation of the implicit guarantee is what’s killing us. Once GSE debt holders see through the smoke agency yields have to rise, driving up mortgage rates (that are already starting to rise a bit). That’s what will squeeze families (who are homeowners, when they renew their mortgages).

I’m going to kick the hornet’s nest here: I don’t see how the failure of F&F “further squeezes American families” unless American families are long a boatload of FNM and FRE. Maybe the bailout squeezes families more?

“Taxpayers on hook to bail out Fannie, Freddie”, by Sen. John McCain, St. Petersburg Times, July 24, 2008.

Americans should be outraged at the latest sweetheart deal in Washington. Congress will put U.S. taxpayers on the hook for potentially hundreds of billions of dollars to bail out Fannie Mae and Freddie Mac. It’s a tribute to what these two institutions — which most Americans have never heard of — have bought with more than $170-million worth of lobbyists in the past decade.

With combined obligations of roughly $5-trillion, the rapid failure of Fannie and Freddie would be a threat to mortgage markets and financial markets as a whole. Because of that threat, I support taking the unfortunate but necessary steps needed to keep the financial troubles at these two companies from further squeezing American families. But let us not forget that the threat that Fannie Mae and Freddie Mac pose to financial markets is a tribute to crony capitalism that reflects the power of the Washington establishment.

Carol Levenson is quoted all the time in Barron’s and other publications. Excellent ***independent*** corporate bond analysis.

Gimme Credit?

And we take heat for our strange name!

“WaMu Slumps as Gimme Credit Cites Liquidity Concern”, by Ari Levy, Bloomberg, July 24, 2008.

Washington Mutual Inc. tumbled more than 20 percent for a second day as Gimme Credit LLC said unsecured creditors were “pulling funds” from the biggest U.S. savings and loan.

“We won’t use the phrase `run on the bank,’ but we would be remiss if we did not observe that many creditors have quietly been pulling funds,” wrote Shanley, based in Chicago. Their actions are “presenting an increasing funding challenge,” she wrote. Gimme Credit is an independent research firm serving corporate bond investors.

Oops again! Having a bad day. I read that as “Gimme” was a partner, but they are the analyst. Still, this is pretty heavy stuff …

He’s been consistent in his message for decades, as a doctor had first hand experience on health care and how government backed medicare was failing, and the guy could go head to head with a PhD’d Bernanke without missing a beat.

During the primaries, it seems so many folks went out of their way to sweep this guy under the rug.

Even the Republican party wanted nothing to do with him. Easy to see why too, he called them at their own game. Just about every other candidate was for bigger government (for the sake of safety – what was that quote again about giving up freedom?)

I think he got a raw deal because of his stance on the war in Iraq. The economy wasn’t in quite the dire situation it was in now.

And yet, he seemed to be the only person who was preaching from the doctrine of Chicken Little about the sky falling down.

And it did =/

I don’t agree with everything he says, but when I watch the news and see the Repub candidate that “we” chose (I’m thinking I’ll just change to an Independent now) can’t even remember which country borders which country…

It’s just brutal.

Personally, I’ve come to the conclusion that folks don’t like details and explanations. I mean look how many never bothered to read their own loan docs or purchase contracts! They just want to know WHAT and now HOW.

We’re going to CHANGE things and make things BETTER.

(details to [possibly] come at a later date)

That’s what wins elections.

I think Ron Paul is going to be the only guy who can continue to speak on these things and without saying it, have the words “I told you so…” echo in our heads.

Uh oh. Canadians will recognize this classic bureaucratic dodge: “We couldn’t do anything because of the ongoing investigation.”

Bottom line — the FDIC problem list may not be listing the biggest problems

“Why wasn’t IndyMac on FDIC problem list?”, by Kathleen Pender, San Francisco Chronicle, July 24, 2008.

However, 96 percent of the banks that failed between 1990 and 2002 were first on the problem list, according to an FDIC study.

Why wasn’t IndyMac?

FDIC spokesman David Barr said it wasn’t on the list because the Office of Thrift Supervision, IndyMac’s primary regulator, didn’t put it there.

The San Francisco OTS office was the direct supervisor.

OTS spokesman William Ruberry says his agency was aware of IndyMac’s problems and started its regular exam in January, four months ahead of schedule.

“We called in the FDIC to join the exam with us early on in the process,” he says. Both regulators “were fully aware of everything to do with IndyMac’s situation. It was not a surprise.”

Ruberry says the OTS could not issue a final rating until it finished the exam, which took about six months. At that point, it went on the problem list.

“Bankrun,” says Igor … shhhhhhhh …