Archive for July, 2008
Some people theorize that the terrorist acts of September 11, 2001 were part of a long-term plan to strike at the heart of the United States through financial instability. The Bush administration had no long-term growth plan, and in fact had very few plans at all. After September 11 the Bush administration spent trillions of dollars. A growth plan had to be invented. Low interest rates and home refinancing was the best way to put money into the economy. It was a failed experiment. How are Islamic banks doing now? Quite well, as you can see:
Last year as we watched the decline of the mortgage market we suspected the problem was deeper than that. Mortgage blues spread around the world. Now the problem is well beyond mortgages. Credit deterioration is beginning to spread outside of residential real estate into commercial loans and credit cards, BMO Capital Markets analyst Peter Winter said.
Federal Reserve Chairman Ben Bernanke said “Proposed changes to mortgage lending rules are intended to protect borrowers from market abuses and boost market competition”. My bone of contention regarding the subprime fiasco, is that rules were in place to help protect consumers.
What do IndyMac and Countrywide have in common? Double speak and CEO public statements that mean little or nothing. Some call it outright lying to the public and stockholders. Just two months ago, IndyMac’s CEO was calling the plunge in the company’s stock unwarranted, even as house price declines accelerated. “Given the decline in our stock price, some people have questioned Indymac’s survivability in the current environment,” he wrote back on April 30, with IndyMac shares trading at $3.25 apiece. “I am here to tell you that I believe we have turned a corner and that our business is improving.” The same thing happened at Countrywide.