MUST READ!!!!!!! if you really want to know where things are going
Denninger has been nailing it right on the head lately........we are mathematically screwed and if we continue down the same road 30-50% unemployment is guaranteed and our healthcare system is bankrupt within 12 to 24 months. It really is not too hard to understand the math, if you are mathematically inclined, and here is some very good work from someone who gets it....I highly recommend Denninger's blog.
I and others have for nearly two years said that "subprime" was going to be a side show compared to both ALT-A and "Prime" delinquencies on mortgages.
All I can say now is: it's starting.
April 21 (Bloomberg) -- Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.
The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.
Of all borrowers who ended up in default, 34 percent told Fannie and Freddie they were earning less money, about 20 percent cited excessive debt as a reason for missing mortgage payments, and 8.1 percent blamed unemployment, FHFA said.
It isn't over either.
Perhaps in response to this, Freddie Mac's acting head apparently has committed suicide:
Police responded to the Kellerman home after receiving a call from his wife.
Kellermann was 41 years old.
He was named Acting Chief Financial Officer of Freddie Mac in September of 2008. According to Freddie Mac's web site, he had been with the company for over 16 years.
That's sad, but what's at least as equally sad is the number of Americans who have been screwed out of everything, including their homes, over the previous eight years. Who did the screwing?
People who knew the mathematical reality of what they were doing but either (1) suspended disbelief and critical inquiry or worse, (2) knew full well what they were doing but figured they'd loot the public (and their firms) and get out with the cashola before the inevitable collapse.
Folks, this leads into what else is going on with "lending" in general: All the banks say they're lending more, but if they truly are, they're idiots. The truth is likely that they're not, because there is no argument for "lending more" into a slowing economy.
What the crooners simply refuse to accept is that this economic mess is not due to a business cycle or anything of the sort. It occurred and is continuing because there is too much debt in the system for the amount of earnings capacity that exists, and nothing will fix the economy until that excess debt is flushed out.
That is, these lenders - all of them - intentionally lent money to people who were of inadequate earnings capacity to pay it back. This didn't just happen at Freddie Mac or Fannie Mae.
It happened everywhere.
We replaced earnings advances with debt.
Well, ok, we tried to replace earnings advances with debt.
See, you can't do that for very long, because debt has to be paid back, at least in theory. The money you "pull forward" by taking on debt instead of saving it up not only has to come out of your future earnings, so does the interest. As such the longer this sort of deception goes on the worse the inevitable correction is for the economy.
The policy-makers at the top of the banking system, including Congress and The Fed, are directly responsible for not only willfully refusing to perform their regulatory function to prevent and punish fraudulent lending but in addition intentionally spurring it on! Alan Greedscam's infamous comments urging consumers to look at taking adjustable mortgages - at a secular low in interest rates, knowing full well that rates had to rise from there - was part of it. Congress passed laws at the urging of the banking industry, including a law that made it more difficult for consumers to declare bankruptcy and stick lenders with the (just) consequences of poor or no loan underwriting. We even exempted certain classes of loans (for example student loans) from bankruptcy discharge entirely, thereby goading lenders in that space to make loans completely without regard to ability to pay.
All of this was done for the explicit purpose of goosing "values" - whether those "values" were home prices, the price of college education or the stock market.
But debt-induced "asset inflation" never lasts.
It can't last, because it is mathematically impossible to add to cash flow requirements while maintaining monetary earnings output as a constant and yet become more wealthy.
But that's what you were sold America - by both bankers and politicians.
You were lied to.
There is only one way to put America back on an even keel.
The excess debt must be removed from the system.
There are only two ways to remove debt from the system:
Pay it down
That's all there is for choices. If the debt cannot be paid down due to the lack of cash flow to do so, the only other remaining choice is to default it, and the sooner we face reality the better off our economy will be.