The Fed was wrong, says Bloomberg, and so was everyone else who said the subprime crisis was contained.
The subprime mortgage industry’s problems were contained, they all said. It turns out that the turmoil was contagious.
Washington Mutual, a major bank, just announced their deposits have decreased sharply and are now spending “billions in financing costs, a business that used to generate cash for the bank.” Central banks yesterday worldwide pumped many billions into their systems trying to support teetering banks and “provide liquidity” (translation: the banks need short-term money fast to service their debt obligations and margin calls.)
American Leftist asks, why are liberal blogs comatose about this?
Meanwhile, popular, high traffic liberal blogs, like firedoglake, Daily Kos, David Sirota and Crooks and Liars are totally oblivious, running posts on their usual obsessions, the presidential campaign, wiretapping, and the invariable helpless handwringing about the war in Iraq.
Indeed, a quick scan of the above blogs plus HuffPo and Americablog showed little coverage of the credit crisis. Hmm, maybe it’s because they can’t blame Bush for it, so therefore they don’t consider it bloggable? Or maybe they don’t realize yet how serious it is or think that they in their little netroots bubble will somehow be immune from this. Dunno, but it is odd.
From the normally on-the-ball Nicole Belle at CrooksandLiars on the credit crisis.
Greatâ€¦just in time for my trip to Europeâ€¦
What’s a few billion dollar hedge funds blowing up while central banks try to stop the bleeding when you’re about to go to Europe? Oh the bother of it all. She recommends links to “wade through the hype of conflicting information on the status of the market.” But Bloomberg sees nothing to be confused about, they say it’s “contagious”, so why does C&L treat it as a minor annoyance?
This is going to be a campaign issue in the upcoming elections. Maybe even overshadowing the Iraq War. Why? Look at this chart. It shows the number of subprime mortgages that will reset in 2007-2008. These are mostly 2/28 adjustable rate mortgages made in 2005-2006 with extremely low payments for the first two years, which then reset to a much higher (and adjustable) rate. Nothing can stop this from happening, and predictions are that several million will lose their homes. They will not be happy about this. Spending will drop nationwide. Businesses will see income fall, maybe report losses. They will not be happy either. Neither will their laid-off employees. I’m guessing there may be a whole lot of seriously pissed off people in this country soon. We need to start thinking now about what we can do to help them.
PS Sue says, most aren’t paying attention yet, not just liberal blogs. They will be soon enough. “Honey, I thought our mortgage payment was $1800 a month, not $2200… and why does it say it will be $2500 in six months?”
Finally, this just in – yet another structured finance product.
Constant Obligation Leveraged Originated STructured Oscillating Money Bridged Asset Guarantees, or COLOSTOMY BAGS. Designed to accommodate the most sophisticated investment strategies, Colostomy Bags contain the equity tranches of Structured High Interest Taxable derivatives…