Washington Post: Boom, Bust & Aftermath Part III

The 3rd and final part of the WaPo series is posted, and this one is subtitled: "How the housing bust started a panic in Florida, felled a storied bank and raised the specter of recession."


The Bubble
Alec Klein and Zachary A. Goldfarb
Washington Post, June 17, 2008; Page A01

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  1. PrahaPartizan commented on Jun 17

    Why can’t the business press understand that the “housing bust” has not “raised the specter of recession?” Without the “housing boom” we would have had no recovery whatsoever from the recession which occurred in 2001-2002 engineered so masterfully by Greenspan with his rate hikes right through all of 2000. Bush’s tax policies did nothing to promote the economy, other than to make it easier for the uberwealthy to move their money offshore beyond the reach of the IRS. We had no economic growth from 2001 to 2008, despite the talking heads’ best efforts to chat up the US economy and its prospects. This is especially true if we look at the real inflation-adjusted “growth” we’ve seen. Our Fourth Estate has become totally complicit in this charade which the plutocrats have been operating for the last eight years. It’s worse than a shadow puppet play in Indonesia, although our economy comes to resemble a Suharto-like kleptocracy with every passing day.

  2. dss commented on Jun 17

    What is missing from that chart is the actual mortgage rates.

  3. dave54 commented on Jun 17

    LIQUIDITY GLUTTONS: After the high-tech bubble crashed the Fed cut the
    discount rate to a ~40 year lows. Investors/financial institutions could
    then raise huge amounts of capital, at for example about 1% in Japan. They
    then (in that nearly deflationary environment) were anxious to lend to the
    highest (A+ rated) borrowers, like the U.S. Treasury [i.e. the carry trade],
    or buy bundled tranches of what had historically been considered safe, home
    (residential) mortgages. However, as demand soared for the higher yielding
    home loan securities, riskier (sub-prime) mortgages were blended in,
    adulterating the mix, because for awhile at least, the big international banks
    [e.g. Citigroup, UBS, HSBC, etc.] didn’t seem to care or were unaware.

    Globally rates were so low and [executives] stock-option packages so lush,
    that any warning signs/whistle-blowers got brushed/shunted aside, becuase the
    over-riding priority was on higher earnings: Their winning formula was to keep
    stock prices on Wall Street high and cap gain taxes in Washington low…As for
    workers wages & benefits, our manufacturing base, the deficits, international
    relations, the environment, or a progressive agenda? All heresy…a communist/
    girlie-man plot to undermine solid American values.

    NEW YORK TIMES: In today’s issue, “…since last July [major U.S.] banks have
    written down the value of the assets they hold by $107.2 billion, gutting their
    earnings and share prices. Worldwide, the reckoning totals $380 billion, much
    of which reflects a plunge in the value of tricky mortgage investments.”

    REAGANITES were adamant about cutting wages, benefits, taxes and regulations
    because they argued, only the ‘private sector’ could make best use of those
    assets. They would rather see trillions in wealth destroyed (ironically, while
    claiming the moral~high~ground) than have that money fund a ‘socialist’ agenda
    like universal healthcare, because liberals at times have also proven themselves
    to be wasteful, corrupt and/or incompetent; It’s how/why Rush Limbaugh makes
    millions; Exalting in America’s misfortune.

  4. lowrydr310 commented on Jun 17

    The housing market is so shallow and pedantic…

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