UBS sees writedowns hitting $600 billion

No one knows the total damage because no one knows how to value these instruments. Suffice it to say, it ain’t gonna be good.

I knew it was the beginning of the end when they repealed the Glass-Stegall Act in 1999. The banking industry was heavily regulated and had oversight to prevent cyclical investing in inflated assests. The first great depression it was stocks. This time it was houses. Both assets subject to inflation by loans.

I wanted to give you my idea for a possible solution to the crisis in the housing market. First let me say ,and make no mistake about it, this crisis will lead this country down the road to a major economic meltdown. It will not in any way be stopped by giving people $600. The public has been using their homes as piggybanks for a long time now. In not arguing the wisdom of this,it has been the single factor to the economic expansion of the last decade. People would buy and finance this buying with the equity in their home.
OK those days are over. But to insure the countries future, the housing market must be stableizied, and stabilized now. This can only be done in one way and that is to stem the rapidly growing number of foreclosures. THIS CAN BE DONE BY OFFERING FIXED INTEREST RATES ,TO ANYONE THAT QUALIFIES, OF 2.5%. Now you may ask, “Who is going to loan money at that rate?” Unfortunately, it is going have to be us, the United States Treasury.

My idea for a solution is simply as follows: The government becomes the prime investor in mortgage backed securities purchased through FNMA,FHLMC,and FHA. If the government were to say to the world, ‘We have $150 billion available for only the next 12 months to loan at 2.5%, for would be called in the mortgage industry, a 30 due in 20 loan, 30 year fixed rate amortized over 30 years but all due and payable in 20 years, for both purchases and refinances, FORECLOSURES WILL STOP AND BUYERS WILL BUY!!!
And the best part of this is the government is only loaning the money,not giving it away. We will get paid back with interest, all be it at a low rate, but it is better than the alternative, recession/depression. This will also free up the credit markets to loan money to other parts of the economy, thus helping us to stay out of economic peril.
I’m not an economist and maybe I’m missing something ,but it seems like a viable solution to what if left to fester,is going to be the worst economic situation this country has ever seen.

The reckless business practices allowed
to go on without any oversight from
our special interest congress and these
so called rating agencies is a travesty
to the U.S. taxpayer. These losses should
not be allowed to be written off period.

It is amazing the negative press on the banks. Using the numbers above 600 Billion or 800 Billion loss on 2 trillion of origination they can lose 1 trillion and still ahead. Now the Government is lowering rates and pouring money into the system. All the meltdown is going to do is cause what needed to be corrected and that is the number of banks. Gloom and Doom. What is the employment rate? The weaker dollar is finally helping the Trade Deficit. The real correction would begin if there was proper valuation of foreign currency. This is all being done with record Oil Prices. Housing needed a correction and more due to supply and demand than just financing. Again the media goes to the extreme to find a story and everybody takes it as religion.

We are heading into a depression, in the US at least. The banks played monopoly and lost. All sectors of the US financial system are feeling the stress. Printing more money will not help since the US does not produce as real good anymore. The job spiral will continue. We have to pray that our next leaders in 09 have a way to rally the Country onto a new path because the old post-WWII financial system has come undone

$600 billion is light. $2 trillion in new mortgages were originated btwn 2002 and 2007. plunging property prices and defaults will turn about 30% of these bad. this will have ripple effect on consumer credit adding at least another $200 billion. total losses will reach at least $800 billion for the financial sector with the majority of these losses spread among US institutions. by comparison, US money supply (M1) is about $1.3 trillion. bailing out these banks will mean two things: much higher US inflation and dollar devaluation…fasten your seatbelts the pain is just beginning…

Lenders got greedy. Yes, borrowers were freaking stupid and deserve to some extent what’s coming to them. But the people who allowed them to get into that situation in the first place, knowing full well (and probably better than the borrowers themselves did) the risks involved. I sold my CA home last summer (2007) and have stayed out so far and plan to do so until at least summer 2009.

What all these highylu paid executives and ultra modern IT infrastructure were doing for all these years.

The answers are simple. You need morale and character for successful business. The computers and executives are not enough.

The mortgage/SIV meltdown could never have happened without the near-criminal complicity of the bond rating agencies. The way the system works is the banks/brokerages shopped thier tranched-out garbage until they found the rating they wanted at which time the fortunate agency would get the cash. Can you even imagine a system that is set up with with worse conflits of interest? It is time for the ratings agencies to be paid for by the buyers or even better an industry-wide independent fund.