There is no argument to that. I think we are all in the know that the situation is such that it may not be possible to let the market correct as it should. We have previously speculated that the domestic investment in leveraged obligations is more then anybody cares to acknowledge and this is the underlying cause (IMO) of any such bailouts, extensions, etc… I do believe this is one of the prime reasons why this depreciation cycle cannot be compared to the one in the 90’s or even the Japanese cycle. To me it is quite a bit worse then either of those because of the underlying leverage problem. I think that in the long run, the government (I lump Bernanke in with all those boobs) will need to lean on bedrock institutions and let others pretty much fend for themselves. In other words, I think mainstream banks will be supported by the federal government in one way or another. Lenders will either need to fend for themselves or possibly allow themselves to be swallowed up by banks. Bond insurers will ultimately get bailed out as well.
JWM I guess we interpret different results from the story. When I read,
“As part of the changes, Bernanke recommended that Congress give new, broader powers to the Federal Housing Administration and to the Department of Housing and Development.
Giving more strength to the national housing market, Bernanke said, “would be facilitated by allowing the FHA the flexibility to offer refinancing products to more borrowers.”
Yes he did go long and hard about basically begging investors to allow loan modifications via principal reductions rather then rate mods, but he also spoke a heck of alot about FHA “modernization.”
In the end, I think we would both agree that he said a whole hell of alot of nothing.
