Three (3) critical questions for the housing market:
By Daniel at 17 January, 2010, 11:10 am
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1) When Bernanke’s MBS purchase program expires in March, will he AGAIN go against his word and re-up debt monetization?
2) Will Congress extend AGAIN the homebuyer purchase with a taxpayer giveaway?
3) Will FHA (or some other taxpayer subsidized entity) continue to make high leverage loans to “buyers” with low credit scores, just to keep inventory moving at all costs?
Face it, if the govt is willing to destroy the currency by continuing above 3 measures, they can print infinite money and keep the Ponzi scheme floating. A do-or-die approach such as that will either produce self-sustained housing floor if jobs recovery in time, or else risk sovereign default and/or currency crisis.
Bernanke is risking our future (or what’s left of it) with his monetary experiment.
I know that reflating housing assets matters so much to Bernanke that there is almost no chance of losses and impairments being willingly recognized by big lenders. If the government can keep on dreaming up mark to model, loan mods, housing credits etc, then they will. Anything to prevent asset deflation and buy some time, whatever the cost to the national balance sheet. This would be true in a non-election year, so just imagine how much honesty we’ll get in 2010.
What could force Bernanke’s hand? The bond markets, perhaps, driving up interest rates, turning a flood of property defaults into an avalanche. Bill Gross’s point is that somebody is going to have to buy US paper, post QE, if the government show is to be kept going and most of the obvious buyers are tapped out.
No one is being accurate as to how many houses are NOT being counted as “bad assets” once they hit the foreclosure point as some banks keep a “shadow inventory” of housing assets that for whatever reason are kept off their “toxic assets” list.
If a bank has 4 or 5 mini-Mansions at $3-$4Million apiece that have hit the danger point, to keep them off their list of foreclosed assets makes them appear “a little better”. Imagine a bank that has 40-50 of these types of “troubled assets” that they keep hidden.
Anyone who says we have “clearly hit bottom” is either unaware or doesn’t want to be aware of the true numbers.
- basehitz & JAMES CARLINI
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