I’ve lost all faith….

[XBoxBoy]

Up till now, I’ve always thought Bernanke was okay, not the best, but okay. However today in a letter he sent to Sen. Charles Schummer he says the following:

“It might be worth considering at this juncture whether the private and public sectors, separately or in collaboration, could help the situation by developing a broader range of mortgage products which are appropriate for low-and moderate-income borrowers, including those seeking to refinance.”

“Such products could be designed to avoid or mitigate the risk of payment shock and to be more transparent with respect to their terms. They might also contain features to improve affordability, such as variable maturities or shared-appreciation provisions for example.”

Oh yeah Ben, that’s just a f’ng great idea! Let’s just encourage those financial geniuses on wall street to create a broader range of mortgage products. Like we don’t already have enough creative financing going on now!!!

I honestly can’t believe that he would write such a thing!!!!

See the marketwatch story here:
http://www.marketwatch.com/news/story/new-mortgage-products-could-help/story.aspx?guid=%7B69E9EB78%2DD404%2D4305%2D82E2%2D7892DB5EA2B8%7D

[waiting hawk]

He just has to say that crap like he is doing something. Read this.

http://www.bloomberg.com/apps/news?pid=20601087&sid=atbDFYHjHwcI&refer=home

[bsrsharma]

What’s wrong with some soothing words to a populist senator? It is his actions that matter – and he has shown levelheadedness so far. If he drops funds rate in the face of inflation – that is when he becomes a crook. Ladling out a few bromides to politicians is the cost of keeping his job.

[XBoxBoy]

bsrsharma, I sure hope you’re right that it’s just talk to keep the politicians happy. I just keep getting the uneasy feeling that he’s really in delusion land, thinking that a little more liquidity, a little more credit, more creativity, and viola, we have a nice growing economy. Guess we’ll see soon enough.

[bsrsharma]

This should relieve your unease:

————————————————————
He was educated at East Elementary, J.V. Martin Junior High, and Dillon High School, where he was a high achieving pupil. He taught himself calculus, edited the school newspaper, was class valedictorian and achieved the highest SAT score in the state that year — 1590 out of 1600. He was also the All-State saxophonist, playing in the school’s marching band.

On leaving high school in 1971 he enrolled at Harvard University, where he spent his undergraduate years in Winthrop House and graduated summa cum laude with a B.A. in economics in 1975. He received a PhD in economics from the Massachusetts Institute of Technology in 1979. He taught at the Stanford Graduate School of Business from 1979 until 1985, was a visiting professor at New York University and went on to become a tenured professor at Princeton University in the Department of Economics. He chaired that department from 1996 until September 2002, when he went on public service leave. He resigned his position at Princeton July 1, 2005. He has given several lectures at the London School of Economics on monetary theory and policy and has written three textbooks on macroeconomics, and one on microeconomics. He was the Director of the Monetary Economics Program of the National Bureau of Economic Research and the editor of the American Economic Review.

[SD Realtor]

XBox I agree with you. I get that same sick feeling in my gut as well…

SD Realtor

[HereWeGo]

Strangely, that letter restored much of my faith in the Fed.

[XBoxBoy]

bsrsharma, never confuse someone who is smart with someone who knows what’s going on. It always seems to me that the smartest guys are the best at deceiving themselves. Hopefully, I’m wrong about this, and Mr. Bernanke will do the right things and steer the economy in the right direction. It’s just I’ve seen plenty of very smart experts totally mislead themselves. (Matter of fact isn’t that exactly the lesson of Long Term Capital Management’s failure?)

[stansd]

I’m going to go against the grain here. I agree that too much Wall Street creativity is not the best thing. That said, I think the sharing the gain (and potentially loss) is an interesting idea. It allows people to bear the risk based on their view of the market.

In the current environment, one might be able to take a mortgage at a higher interest rate in exchange for downside protection. Similarly, one could pay a lower interest rate in exchange for giving away a portion of the upside (probably based on Case Shiller for an area rather than your own house price to avoid you letting it go to pot).

I’d be interested in a product that gave me a lower rate in exchange for my gain over the next 10 years…let someone else participate in that upside. I’d be really interested in a product where I could trade the potential gain for protection from the loss and wind up with a similar interest rate. If I knew I’d get a 100K check if the market went down 100K, I might be a buyer today instead of 2010.

Stan

[betting on fall]

In my attempt to translate, I think he said: “I can’t do anything to fix this problem. I can cut rates, but that’s not going to do squat. Now go bug some other government agency.”

Those other government agencies- FHA, Fannie’s- are the ones that the Countrywide’s of the world called slow and out of touch with the “new realities” of the mortgage market. I don’t foresee them happily running to the aid of the market.

And I still think that any government “bailout” that would have a meaningful impact on our problem would be far too expensive and far to complex to get off the ground.

But I will admit to at least being a little worried. . .

[temeculaguy]

So far Ben hasn’t screwed anything up, let’s see if he screws things up before decide he is an idiot. A few months ago I read some of his writing where he felt that the depression could have been averted or shortened with liquidity and not an interest rate reduction. He has also been labeled Helicopter Ben because dropping liquidity on the market like helicopter drops of money is one of his favorite tools. market went to crap a few weeks ago, financial engine seized and he did just what we thought he would, temporary liquidity injections but no drop in the fed funds rate. In studying him further, I draw the conclusion that he is not a fan of asset bubbles and the one he is facing he inherited. Let’s give him a few weeks to see what he does, you may be suprised and he just may stay on the sidelines as far as the rate goes, or it may go down a tad but not for too long. A half point in the fed funds rate isn’t going to stop the deflation in the housing bubble anyway.

[cr]

Enter the 200 year mortgage?

[lindismith]

200 year mortgage! LOL

Yeah, what exactly do these new products and options look like????? Anyone have any other ideas?

[Author]

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