SHOCKING FLASH: Alan Greenspan shocks markets, says home prices are going to crash and crash significantly. No, I'm not making this up.

- Cause greatest financial mania in human history - check

- During mania, tell people to take our adjustable rate loans - check

- During mania, deny there was a mania - check

- After crash starts, admit you screwed up - check

- To finish things off, tell the world that home values are gonna crash and crash significantly - check

Wow.

A HOUSINGPANIC MESSAGE FOR ALAN GREENSPAN - GO F*CK YOURSELF. YOU RUINED LIVES. YOU DESTROYED FAMILIES. AND YOU WILL NOT BE FORGIVEN.

Greenspan alert on US house prices

US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.

In an interview ahead of the release on Monday of his widely-anticipated memoirs, the former chairman of the Federal Reserve said the decline in house prices “is going to be larger than most people expect”.

Another mortgage meltdown mea culpa: Alan Greenspan admits he screwed the pooch, didn't read HousingPANIC

Too bad a bunch of volunteer bloggers understood the issue better than the economist who was in charge of our banking regulations, money supply and economy.

Americans, Alan Greenspan's incompetence has led or will lead to the downfall of the American homebuilding industry, the loss of $10 Trillion+ of wealth, millions of lost REIC and associated jobs, ruined families, millions of foreclosures, and the implosion of the world financial system.

Whoopsie - my bad. Mulligan?

Greenspan Acknowledges He Failed to See Early on the Risks of 'Subprime' Mortgages

WASHINGTON (AP) -- Former Federal Reserve Chairman Alan Greenspan acknowledges he failed to see early on that an explosion of mortgages to people with questionable credit histories could pose a danger to the economy.

In an upcoming interview, Greenspan said he was aware of "subprime" lending practices where homebuyers got very low initial rates only to see them later jacked up, causing severe payment shock. But he said he didn't initially realize the harm they could do.

Critics say the Fed kept rates too low for too long, encouraging a Wild West mentality in housing.

Greenspan, however, defended the institution's actions.

"They are mistaken," he said of the critics. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he said.

Since Ben Bernanke didn't see the housing bubble smack dab in the middle of it, what makes you think he sees the crash?

Supposedly, unless he was lying, Bernanke, the smartest guy in the room, didn't see the housing bubble. Guess he never found his way over to HousingPANIC or any of the other bubble blogs. Or ever read Manias, Panics and Crashes.

Hell, even bubble-creator Greenspan just thought we had some "froth". He he he he he.

So if Mr. Smarty Pants didn't see the bubble, rest assured HP'ers that he doesn't see the crash. I swear, we are run by monkeys. Here's Ben from October 2005:

Bernanke: There's No Housing Bubble to Go Bust
Fed Nominee Has Said 'Cooling' Won't Hurt

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

"House prices are unlikely to continue rising at current rates," said Bernanke, who served on the Fed board from 2002 until June. However, he added, "a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year."

Greenspan has said recently that he sees no national bubble in home prices, but rather "froth" in some local markets.

I'll leave you this week with two quotes from the person most responsible for the housing bubble, and eventual crash - Mr. Alan Greenspan

"Don't allow money-supply growth to spiral out of hand.”

- Alan Greenspan, 1977

But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums

- Alan Greenspan, 2005

Mortgage Mess: Clean-up in Aisle Three!

Looks like we're not gonna need government regulation of the mortgage market after all. The market is gonna take care of this mess for us

The days of liar's loans, stated income, no-money-down, negative amortization, teaser rate, adjustable rate, high LTV toxic mortgage crap went the way of the pets.com puppet.

Why? Because the loans didn't get paid back, and the bagholders said no-more.

So all of the companies involved in that crap have gone out of business, or are on their way out.

It's funny, the Senate will hold hearings in 2008 on this disaster, all kinds of new laws and regulations will go into effect, and in the end it won't matter. The market, as it always does, cleans up its own messes.

The only problem though is that this mess was massive and historic, and the clean-up will be devastating.

A little regulation would have gone a long way in 2002, 2003, 2004. But now that the market had to do it, versus our corrupted and incompetent Congress and President, the cleanup will go on and on an on...

2007, 2008, 2009, 2010, 2011, 2012, 2013, ...

Think it's bad now? You should see the wave of mortgage resets that's about to come crashing on to US shores

The Herald Tribune had a great piece on the wave of payment shock loans resetting in the next couple of years. We're just getting started folks. When this is all over, we'll be shocked at how far home prices dropped, and how many families lost their homes.

You owe it to yourself to read the article. And get ready.

Mortgage renewals set to prick U.S. property bubble

The mortgage meltdown has arrived at something of a turning point.

So far, the loans that have gone bad were among the worst of the worst. Some were based on outright fraud, either by the lender or the borrower. In many cases, buyers were never going to be able to make their monthly payments and were instead banking on a rapid appreciation in home values.

The peak month for the resetting of mortgages will come this October, according to Credit Suisse, when more than $50 billion in mortgages will switch to a new rate for the first time. The level will remain above $30 billion a month through September 2008. In all, the interest rates on about $1 trillion worth of mortgages, or 12 percent of the U.S. total, will reset for the first time this year or next. A couple of years ago, by comparison, only a marginal amount of mortgage debt - a few billion dollars a month - was resetting each month.

So all the carnage in the mortgage market thus far has come even before the bulk of mortgages have reset. "The worst is not over in the subprime mortgage market," analysts at JPMorgan recently wrote to the firm's clients. "The reason for our pessimism is that loans originated in late 2005 and all of 2006, the period that saw peak origination volumes and sharply decreased underwriting quality, are only starting to reset in large numbers."

It isn't hard to figure out what will happen when buyers who were already stretching to afford a house are faced with suddenly higher payments. Many will manage. They will cut back on spending, or refinance their mortgage and get a new one they can afford.

Others, like the buyer I interviewed two years ago, probably planned on selling their homes after a few years all along. For them, the artificially low initial rate was a no-lose proposition.

But there are also likely to be a shocking number of people who lose their homes.

In honor of today's Fed meeting, and the mortgage panic underway, HousingPANIC changes its name for a day

Note the one-day new title above.

Waddaya think?

Any suggestions for honorary one-day titles in the future?

Alan Greenspan, the doof who caused the housing bubble, after leaving office at least tried to make amends by telling you what was coming

I'll never understand why Greenspan did what he did. Why he panicked and lowered rates to 1%, then kept them too low for too long. And why he told people to get into adjustable rates right before he raised rates 17 straight times. Makes no sense. Unless there was money changing hands.

But here's the maestro in 2005, after realizing his housing bubble had spun hopelessly out of control. Read every word. Slowly. Then read them again. And again. And again.

In this case, he's 100% correct. 100%. And you should get ready. It's here.

And can we get that damn Presidential Medal of Freedom back? Every time I see this picture it makes me sick.

"Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent.

To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear.

Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices.

This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums

Should Alan Greenspan be investigated for criminal corruption and fraud?

It's pretty obvious his incompetence caused the housing bubble (note - that quote above was from LAST fall). But like Mike Brown and Alberto Gonzalez, you don't go to jail for being a boob.

But corruption, that's another thing. For Alan Greenspan to call in 2004 for the creation and use of Option ARMs and Liar's Loans, and for Americans to rush into adjustable rate mortgages, right before a record string of interest rate hikes, is beyond incompetence, and most likely $$$ from the Mortgage Brokers Association. And the Fed, who is supposed to oversee banks and lenders, let things spin totally out of control during the bubble. Oversight? Regulations? Guidance? Nah!

You would think something funny was going on behind the scenes. Or payments or promises of future payments (like speaking fees to groups like the the corrupt mortgage bankers) being made. Follow the money.

So, should Alan Greenspan be investigated for criminal corruption?

Alan Greenspan played a major role in the housing boondoggle.

On February 26 2004, he said, "American consumers might benefit if lenders provide greater mortgage product alternatives to the traditional fixed rate mortgage. To the degree that households are driven by fears of payment shocks but willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home."

Greenspan tacitly approved the whacky financing which produced all manner of untested loans - including ARMs, piggyback loans, "no doc" loans, "interest only" loans et cetera. These loans are a break from traditional financing and have contributed to the increase in bankruptcies.

Millions of people who were hoodwinked into buying homes with "interest-only", "no down" loans will now either lose their homes or be shackled to an asset of decreasing value for the next thirty years. They've been tricked into a life of indentured servitude.

A recent article in the Wall Street Journal revealed the extent of Greenspan's involvement in the housing fiasco. Here's an excerpt from the article:

"Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies.

"I would have liked the Fed to be a leader" in cracking down on predatory lending, Mr Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr Greenspan, whose deregulatory philosophy is well known, Mr Gramlich broached it to him personally rather than take it to the full board.

"He was opposed to it, so I didn't really pursue it", says Mr Gramlich. Still, Mr Greenspan's views did color the regulatory environment, facilitating growing concentration in banking and a hands-off approach to derivatives and hedge funds. That approach, broadly shared by both the Clinton and Bush administrations, is coming under increased scrutiny." (Wall Street Journal)

Ron Paul (you know he's an HP'er) on the housing crash and Federal Reserve

Ron Paul
Don't Blame the Market for Housing Bubble

The U.S. housing market, long considered vulnerable by many economists, is now on the verge of suffering a serious collapse in many regions. Commodities guru and hedge fund manager Jim Rogers warns that real estate in expensive bubble areas will drop 40 or 50%. Mainstream media outlets like the New York Times are reporting breathlessly about the possibility of widespread defaults on subprime mortgages.

When the bubble finally bursts completely, millions of Americans will be looking for someone to blame. Look for Congress to hold hearings into subprime lending practices and “predatory” mortgages. We’ll hear a lot of grandstanding about how unscrupulous lenders took advantage of poor people, and how rampant speculation caused real estate markets around the country to overheat. It will be reminiscent of the Enron hearings, and the message will be explicitly or implicitly the same: free-market capitalism, left unchecked, leads to greed, fraud, and unethical if not illegal business practices.

But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy-- through the manipulation of interest rates and the creation of money-- caused the artificial boom in mortgage lending.

The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990. Housing prices have risen dramatically not because of simple supply and demand, but because the Fed literally created demand by making the cost of borrowing money artificially cheap. When credit is cheap, individuals tend to borrow too much and spend recklessly.

This is not to say that all banks, lenders, and Wall Street firms are blameless. Many of them are politically connected, and benefited directly from the Fed’s easy money policies. And some lenders did make fraudulent or unethical loans. But every cent they loaned was first created by the Fed.

The actions of lenders are directly attributable to the policies of the Fed: when credit is cheap, why not loan money more recklessly to individuals who normally would not qualify? Even with higher default rates, lenders could make huge profits simply through volume. Subprime lending is a symptom of the housing bubble, not the cause of it.

Fed credit also distorts mortgage lending through Fannie Mae and Freddie Mac, two government schemes created by Congress supposedly to help poor people. Fannie and Freddie enjoy an implicit guarantee of a bailout by the federal government if their loans default, and thus are insulated from market forces. This insulation spurred investors to make funds available to Fannie and Freddie that otherwise would have been invested in other securities or more productive endeavors, thereby fueling the housing boom.

The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” Imagine a Brinks truck driving down a busy street with the doors wide open, and money flying out everywhere, and you’ll have a pretty good analogy for Fed policies over the last two decades. Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections.

If housing prices plummet and millions of Americans find themselves owing more than their homes are worth, the blame lies squarely with Alan Greenspan and Ben Bernanke.

It all falls apart. The center doesn't hold. And the Bush White House implodes.

Can the country (or world) take much more of the Bush Administration? Will the US ever be able to dig itself out of the social and financial hole caused by this man, the worst president in the history of the United States of America?

You think it's bad now? Just wait until the apocalypse of the housing crash kicks in, combined with the Iraq debacle gaining steam. $1 Trillion for that "slam-dunk" Iraq and counting. Get those printing presses going.

Does anyone realize that Bush gave Presidential Medals of Freedom to Tenet, Greenspan and Bremer. Instead of medals, I'd be giving them subpoenas right about now.

In a letter written Saturday to former CIA Director George Tenet, six former CIA officers described their former boss as "the Alberto Gonzales of the intelligence community," and called his book "an admission of failed leadership."

The writers said Tenet has "a moral obligation" to return the Medal of Freedom he received from President Bush.

Did Osama bin Laden cause the housing bubble (and housing crash)?

OK, this one ain't PC, but think through the chain of events and unintended consequences of 9/11:

* Osama bin Laden's crew takes down the World Trade Center - check

* Greenspan panics and stupidly takes nominal interest rates down to 1% - check

* Housing market goes nuts with free money pouring out of the banks - check

* Greenspan and Bernanke stupidly leave interest rates way too low for way too long - check

* Housing and mortgage fraud go nuts while unregulated REIC spins out of control - check

* Consumers go on a spending and debt binge the likes of which have never seen before - check

* Housing Ponzi Scheme (finally) ends with millions left holding the bag, millions to go unemployed and trillions of dollars of wealth to vanish - check

* Osama bin Laden laughing in a cave - ???

For those thinking Bernanke & the Fed won't let housing crash, guess you don't remember the NASDAQ crash or WIN either huh?

With the dollar tanking, inflation will rise, giving Bernanke two reasons to make the next move UP, not down. And yup, you know what that'll do to the markets and housing. So be it.

It is NOT the Fed's role to protect asset prices. It's the Fed's role to fight against inflation. Even the incompetent Alan Greenspan, Mr. Bubble himself, telegraphed how this latest bubble would end, and I think with the Alt-A and Subprime meltdowns we're now at the "investor caution" stage:

Rising house and stock prices have made many people feel more wealthy and have helped to support consumer spending, a key ingredient of the economy's good health.

Greenspan, however, said people shouldn't count on that paper wealth, which can evaporate if economic conditions deteriorate rapidly.

"What they perceive as newly abundant liquidity can readily disappear," he said. "Any onset of increased investor caution" could cause home and stock prices to drop, he noted.

A long spell of low interest rates and low risks for investors has especially encouraged investment in homes. Greenspan worried about what would happen if that climate were to change.

"History has not dealt kindly with the aftermath of protracted periods of low-risk premiums," he said.

And this on the Fed's conundrum to move up or down:

Notes from the Federal Reserve rate-setting committee’s late-March discussions, released last week, highlighted that inflation is its biggest concern and that it is leaning toward interest rate increases to curb it, but it may have other cards up its sleeve.

“The committee agreed that further policy firming might prove necessary to foster lower inflation, but in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming.”

Those nebulous comments may dredge up uncomfortable memories of the tenure of Fed chairman Paul Volcker (1979 to 1987), when he chose to curb the nation’s stagflation—characterized by high rates of both inflation and unemployment—by limiting the growth of the money supply and allowing interest rates to rise. That caused a recession in the early 1980s and unemployment levels second only to those of the Great Depression.

FLASH: UK central banker comes clean: Admits causing housing bubble for short-term gain, leaves financial catastrophe for others to deal with

You'd like to think the world's central bankers were smart people. That they cared about short term issues, but had their eye mainly on the long term welfare of people, families and society at large.

That's not the case folks. The US and UK central banks are evidently made up of incompetent, clueless, morally-questionable boobs, driven by short-term business profits and serving their political masters, who could care less about the societal and personal destruction caused by their misguided, short-sighted, greed-inspired ways.

Seriously.

Here's a startling and bizarre admission from UK bank governor Lord Eddie George, where he admits he and his crew inflated the biggest bubble the world has ever seen simply because they thought they had no other short-term option to deal with the 2001 slowdown.

Here's one they should have considered in 2001 - go into recession. Taking that medicine then would have prevented the bubble, and prevented the biggest asset crash in recorded human history now underway.

You should all be outraged, sickened... and not surprised.

The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession, the former Bank Governor Eddie George admitted yesterday.

Lord George said he and his colleagues on the Monetary Policy Committee " did not have much of a choice" as they battled to prevent the UK being dragged into a worldwide economic slump by slashing interest rates. And he said his legacy to the current MPC was to "sort out" the problems he had caused.

"We only had two alternative ways of sustaining demand and keeping the economy moving forward - one was public spending and the other was consumption.

"We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term. But for the time being, if we had not done that, the UK economy would have gone into recession just as the United States did."

He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future. "My legacy to the MPC, if you like, has been 'sort that out'," he said.