patrick.net

I insist that the Fed charter includes the guaranteed supply of foie gras and Caspian caviar.

If Fed cuts further now what are they going to do when the shit hits the fan? Negative fed rates?

The Fed's Charter includes protecting the dollar/peso parity.

"basically garbage loans"

Thank you Captain Obvious! Uh, you wouldn't be holding any of those $250 bil. in soon to be worthless paper now would ya'? What was he saying? 3.5% before year's end? Sure. Anything else?

So... what exactly is the thinking here? If we lower rates (cause Lord knows they're nose bleed high) then as FB's get their resets the loan rates available to them will be lower and payment shock and jingle mail will be prevented? Is that where he's going with this?

If that's the case he's way off. BG doesn't understand the sick mind of the FB. The only reason an FB would stay in a house is a) outrageously cheap payments (teaser/min. payments) OR... b) the home is appreciating so quickly they can access the HATM at will.

Anything else is just so much BS in their minds and preferential tax treatment and having a paid off home some day are just arguments they throw out when asked to defend their pillage. FB's don't believe their own BS. They're not that stupid, but they KNOW you are!

@DinOR,

Not to mention bread will be about $100/loaf by year's end if the Fed adopts ZIRP. Hard to make even the neg-am payment on your NINJA when the cost of everything else is skyrocketing much faster than incomes. Zimbabwe here we come!

Re ZIRP: One slight difference between the U.S. and Japan is, Japan was (and still is) a nation of inveterate savers. During their ZIRP period, they technically didn't need to attract huge amounts of foreign capital to support government & domestic consumer spending. Perhaps Bernanke is hoping that the USD will become the world's next "carry trade" currency of choice.

It's pretty darn interesting how quickly Gross has moved from being the darling of the housing/economy bears to their villain. My interpretation is that he's way more exposed to a housing downturn and credit crunch that he thought he would be. He is trying to save his own ass.

"bread will be about $100/loaf"

Now there's something I hadn't stopped to think about. Even if you are one of the "lucky ones" that has the job, FICO, DTI and... equity to make a re-fi happen what of your other expenses? You know, the ones that have been crazy cheap over the last 5 years?

@skibum,

Not at all. (I've hated BG for some time!)

You're absolutely right though, he wouldn't be squirming like that if it didn't involve pain down the road. He's calling for this and he's calling for that but the one thing he's not calling for is mark to market.

Nope. All of the problems are elsewhere.

Has all these cutting of rates actually resulted in a drop in mortgage rates? So far, I don't think so.

So what makes morons like BG think that as soon as the Fed cuts rates, the lender will follow suit and people will be afford their million dollar homes immediately?

As soon as it became common knowledge that housing is going down and that people who bought overpriced houses are going to be f@cked, there is nothing that the Fed can do.

By trying to meddle, it can turn a recession into a depression. That's about it.

All the bitching and handwringing going on by BG et al. is merely them trying to save their own jobs. Nobody cares about the FBs, nobody cares about individual banks unless they work there, or individual SIVs unless they bought into them. It's all attempts to keep themselves from getting burned as badly as they're going to be burned, and attempts and keeping delusional hope alive for just a little bit longer.

The long and the short of it is this. There is no more money to borrow for American consumers OR American companies. Right now, we have three options. Quit spending, start saving, and buy down the debt. Default and throw a few nukes around to prove we mean it, and never get lent money again. Print money until nobody will lend us a dime, but force 'em to take worthless dollars until the debts are gone.

All the waving and crying and yelling is trying to avoid the first option. If we don't shut up and get on with it soon, we might accidentally find out we're stuck with only the last two options.