Can you imagine what would happen if Helicopter Ben Bernanke and The Fed actually RAISED rates in a couple of weeks?

Well, they should.

But close your eyes and think about it.

If Ben Bernanke pulled his head out of his ass and noticed that the US dollar is in freefall, gold is at an all-time high, oil is at an all-time high, inflation is roaring, the world has lost confidence in the US, and the last jobs report was bogus, he'd raise rates 1/2 point or more.

If Ben Bernanke wasn't corrupt he'd do that.

Everyone thought the last Fed meeting was the biggest one in a generation. I disagree. This next one is.

If Ben cuts, it's over for the US and the US dollar. Get all of your assets out of US$, and consider leaving the country.

If he raises, he's legitimate, serious, professional, independent and strong.

If he holds steady, he's still a pansy and a wimp, owned by the banks and hedge funds.

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.

Open Thread: HP'ers let Ben Bernanke and the Fed know what's on your mind

And advice for Ben for Monday?

Cut 1/2?
Cut 1/4?
Hold?
Raise 1/4?
Quit?

HP's advice: Hold steady, and send this message to failed flippers, housing gamblers, reckless lenders, stupid builders, ramen eating realtors, immoral mortgage brokers and brain-dead bankers: We're done with bubbles. You made your bed, now sleep in it.

Fed Treads Moral Hazard

Wall Street has a dream: that the Federal Reserve will rescue financial markets with a sharp cut in interest rates.

Behind that dream lurks a problem, something financial people call moral hazard.

Moral hazard is an old economic concept with its roots in the insurance business. The idea goes like this: If you protect someone too well against an unwanted outcome, that person may behave recklessly. Someone who buys extensive liability insurance for his car may drive too fast because he feels financially protected.

FLASH: Bernanke having closed-door meeting with homebuilders who f*cked America. So when does he meet Americans f*cked by the homebuilders?

If Bernanke and the Fed cut rates (when they should be raising) to bail out the hedge funds, banks, housing gamblers and homebuilders who made poor decisions these past few years, then all bets are off, especially when it comes to the US dollar, which will immediately and irreversibly melt down.

If the Fed cuts to bail out the bad decisions of homebuilders, housing gamblers and hedge funds, even after Bernanke expressly ruled this out, the moral hazard implications will be off the charts. Kinda like giving in to hostage takers - it only causes more hostage taking in the future.

What will Ben do? Moment of truth HP'ers.

I think he's a puss, run by the bankers and Bush, and cuts 1/4. He'll say he's cutting because of the downturn in the economy due to the housing crash, and softening of the "official" government inflation reading, but we'll all know he'll be cutting to bail out the builders, hedge funds and banks.

But even a cut, and as the economy melts down there'll be cut after cut after cut (see Japan), it won't matter. Housing prices will continue to fall, demand will continue to shrink, the dollar will plummet, and this Ponzi Scheme will come to its rightful and natural end.

It hath been foretold.

Builders Meet With Fed to Discuss Mortgage Crisis - Industry officials are likely to lobby for an interest-rate cut and assistance for struggling homeowners.

Some of the same builders whose companies created the excess inventory that helped push the housing industry into its current downturn are reportedly meeting today behind closed doors with Federal Reserve chairman Ben Bernanke to discuss what can be done to prevent owners from losing their homes to foreclosure.

The actual agenda of the meeting, however, is not completely clear, as NAHB - which arranged this meeting through its High-Production Homebuilders Council - and spokespeople for several large home builders declined to answer questions about it.

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.

HousingPANIC Stupid Question of the Day

When will Bernanke and the Fed panic and cut the Fed funds rate?

A) By next week

B) September

C) October - December

D) Not gonna cut until next year

E) Next move will be a rate hike

Bonus Question: Inflation, Stagflation, Deflation, Reflation or Desperation?

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

Here's CNBC video of Ron Paul questioning Ben Bernanke - "How long can we fool the world?"

Here's the video link

Housing Crash

Ron Paul

Ben Bernanke

China

US Dollar

Boy, has it all come together HP'ers or what?

Play the full 9 minute video, RP starts half way in

RP brings up out of control credit, the monetary system, living off of credit creation, the destruction of the manufacturing sector, the dollar downfall, inflation, war spending, borrowing from China, and asks an annoyed Bernanke "How long can we fool the world?" and asks him if he has his fingers crossed.

Ben tells RP that he's right - we're living off of borrowing from foreigners and that that is not a sustainable situation.

I'd guess less than 1/10000th of 1% of people in the world watched this today. So consider yourself informed.

The clueless Ben Bernanke's $100 Billion Stab in the Dark. Hey Ben, got zeros?

HP Memo to Ben Bernanke:

Add a few zeros next time.

Thank you.

HousingPANIC

Subprime losses could cost $100 billion: Bernanke

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday that subprime mortgage losses could hit $100 billion and threaten consumer spending, but he sought to reassure lawmakers that the central bank was working quickly to strengthen lending regulations.

"The credit losses associated with subprime have come to light and they are fairly significant," Bernanke told the Senate Banking Committee in a second day of testimony on the Fed's twice-yearly economic report.

"Some estimates are in the order of between $50 billion and $100 billion of losses associated with subprime credit problems," he said, referring to a segment of the mortgage market that caters to borrowers with shaky credit.

Merrill Lynch supposedly to hold onto $850 million subprime cancer CDOs taken from Bear Stearns' blown up mortgage hedge fund

Man, I love a good hedge fund blow-up. But I especially love one that "experts" didn't see coming, while HP'ers know damn well many more like it are on the way.

Interesting thing about this whole Bear Stearn / Merrill Lynch mess is that Merrill was gonna dump the cancer as fast as they could, but then all of a sudden they put the word out that they weren't gonna do that. Now why do you think that is?

1) No buyers?

2) Unattractive firesale prices?

3) Middle of the night calls from Bernanke and Paulson (and Cheney and Bush)?

4) Would blow up the entire industry, including Merrill, even faster?

Oh, what a tangled web trillions of dollars of mortgages that aren't gonna be paid back weave. Can you say "systemic meltdown"?

Merrill won't flood market with securities

NEW YORK -- Merrill Lynch & Co. has backed away from a threat to dump about $850-million (U.S.) of securities it seized from Bear Stearns Cos. hedge funds, according to people with knowledge of its plans.

Merrill sold a small portion of the collateralized debt obligations through an auction, said the people, who declined to be identified because the details haven't been announced. It plans to hold on to the remaining securities for now, one person said, without being more specific.

The decision, and the scrapping of a sale Wednesday by JPMorgan Chase & Co., diminished the risk that a large amount of securities would be liquidated immediately. Merrill set the sale in motion to reclaim its loans to the two hedge funds, which had posted losses of as much as 20 per cent by betting on CDOs. The plan may have confirmed that other funds were overvaluing their holdings of similar securities, potentially causing a chain reaction of writedowns causing billions in losses.

"It's an industry issue," said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. Mr. Hintz was chief financial officer of Lehman Brothers Holdings Inc., the largest mortgage underwriter, for three years before becoming an analyst in 2001. "How many other hedge funds are holding similar, illiquid, esoteric securities? What are their true prices? What will happen if more blow up?"

FLASH: Bernanke - "we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system"

FLASH: HousingPANIC says - "Wanna bet?!".

Either Bernanke is as incompetent and clueless as other Bush appointees, or he's just lying through his teeth to try to calm down the situation.

Either way, he's wrong. Why our leaders think Americans need everything sugar-coated I'll never understand. Just tell it how it is. We can handle it. Even if it sucks.

Fed: Mortgage Defaults Won't Hurt Economy

Fed Chief Says He Doesn't Believe Growing Number of Mortgage Defaults Will Seriously Harm Economy

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke said Thursday that he did not believe the growing number of mortgage defaults would seriously harm the economy.

Facing criticism from members of Congress about lax regulation, Bernanke also promised that the Fed would do everything possible to crack down on abuses that have put millions of homeowners in jeopardy of defaulting on their mortgages.

"We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers," Bernanke said in remarks prepared for a financial conference in Chicago.

However, Bernanke in his remarks did not detail any specific tightening of regulations, saying only that the Fed would hold hearings in coming weeks on the matter.

Bernanke said while it was likely that there would be further increases in mortgage delinquencies and foreclosures this year and in 2008, he did not believe this problem would be enough to derail the overall economy.

"We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system," Bernanke said in his remarks, copies of which were distributed in Washington.

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.