The tightly wound economy is such that when adjustments to contradictions take place in one spot they create new contradictions elsewhere, at least that is what an old German philosopher once said. Here is an example:
"Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills. The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank. "Be careful what you wish for,'' Westbrook said. "They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures"."
Also, I wonder how much the increasing Japanese yen will unwind the carry trade, which is been a major source of cheap finance for speculation.
This point is a slight segue, but still within the sphere of the topic, mortgages and lending practices. The NY Times had a detailed discussion of Country Wide Mortgage Co. in two articles in the Sunday edition. What was not discussed was what role out right mortgage fraud might play in the general sub-prime mortgage lending "crisis."
ReplyDeleteSuch fraud was a major part of the S&L failures some time back. A guy named Keating got into some trouble, but not a lot of others did. A guy named Bush was significantly involved at that time. Could this be a hidden aspect of the current situation? There is currently a filing in the NJ courts by a bankruptcy trustee for NJ Affordable Homes. It details an interesting Ponzi scheme using fraudulent mortgages. Those mortgages were sold off to companies like Country Wide and WaMu. This is one small incident, but multiplied across the country and you have a real credit crisis.