"It's a little game that you both play, They pretend they don't see you, you pretend you don't ditch."
It was great today to see some serious coverage of the housing issues still as bad as they have always been. Numerous channels picked up on this NY Times story about the people just not paying their mortgage anymore and getting up to 400 plus days of a free ride.
This of course is not news to readers here, but it was nice to see a full court press on the item. Some good takes:
The Housing Time Bomb
The Reformed Broker
All well worth a read.
Market Ticker had the best line of the day:
If the banks can refuse to admit that a defaulted loan is in fact in default and get away with it why should the person responsible for paying that loan in fact pay? There is no need to do so for the bank to claim it's good! Sauce for the goose, Mr. Bankster.Great point.
Warren Buffet had a often used quote about gold a while back that was:
"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head..."
I should think we could find bookkeepers here on Earth that would see the mechanics of extend and pretend, mark to myth, and delaying foreclosures as pretty stupid as well as fraudulent. But it's the way it's done.
I do not really think I can add anymore to this story. The distortions in the economy are huge. As of late the TED Spread (a measure of interbank lending) has moved up. At the height of the crisis it was said banks were afraid to lend to each other for fear of what the other bank may be holding as assets (or liabilities). I always thought that line was junk. The banks know full well what other banks are holding and thus if they are afraid it is because they know full well their own poor balance sheet. How much more bad mortgage paper can be out there? The FED bought quite a bit and all new paper comes from the government. Just how bad is this?
I would call for a new "Stress Test". Just do one large bank, anyone will do. Send a real team of 200 examiners to just go over the mortgage side of things (first, seconds, etc) and then let's see how that comes out.
As I was thinking about this piece today a quote kept coming back into my mind form the classic film "Fast Times at Ridgemont High":
What is this fascination with truancy? What is it that gets inside your heads? There are other teachers in this school who look the other way at truants. It's a little game that you both play. They pretend they don't see you, you pretend you don't ditch. Who pays the price later? You.
Have a good night.