How Credit Got So Easy
And Why It's Tightening
By GREG IP and JON E. HILSENRATH
August 7, 2007; Page A1
An extraordinary credit boom that created many first-time homeowners and financed a wave of corporate takeovers seems to be waning. Home buyers with poor credit are having trouble borrowing. Institutional investors from Milwaukee to Düsseldorf to Sydney are reporting losses. Banks are stuck with corporate debt that investors won't buy. Stocks are on a roller coaster, with financial powerhouses like Bear Stearns Cos. and Blackstone Group coming under intense pressure.
The origins of the boom and this unfolding reversal predate last year's mistakes. They trace to changes in the banking system provoked by the collapse of the savings-and-loan industry in the 1980s, the reaction of governments to the Asian financial crisis of the late 1990s, and the Federal Reserve's response to the 2000-01 bursting of the tech-stock bubble.
http://online.wsj.com/public/article/SB118643226865289581-dj2aExkITTyvOQKdVAQX79YZrEU_20070815.html
This article echoes my view. If you want to know how bad things are going to get, take a look at your neighbors' balance sheet. Sit back and gauge the true value of your real estate using the 4% yearly traditional increase and trace it back to the last big increase in your neighborhood. I see no simple solution to our present problem and the BS squawking on the TV for lower interest rates is NOT going to help us long term. We're probably best off riding this out and letting the markets adjust on their own w/o further government intercession, excepting the occasional move to stop full-blown panic such as the recent moves from ECB and the Fed adding liquidity.
And Why It's Tightening
By GREG IP and JON E. HILSENRATH
August 7, 2007; Page A1
An extraordinary credit boom that created many first-time homeowners and financed a wave of corporate takeovers seems to be waning. Home buyers with poor credit are having trouble borrowing. Institutional investors from Milwaukee to Düsseldorf to Sydney are reporting losses. Banks are stuck with corporate debt that investors won't buy. Stocks are on a roller coaster, with financial powerhouses like Bear Stearns Cos. and Blackstone Group coming under intense pressure.
The origins of the boom and this unfolding reversal predate last year's mistakes. They trace to changes in the banking system provoked by the collapse of the savings-and-loan industry in the 1980s, the reaction of governments to the Asian financial crisis of the late 1990s, and the Federal Reserve's response to the 2000-01 bursting of the tech-stock bubble.
http://online.wsj.com/public/article/SB118643226865289581-dj2aExkITTyvOQKdVAQX79YZrEU_20070815.html
This article echoes my view. If you want to know how bad things are going to get, take a look at your neighbors' balance sheet. Sit back and gauge the true value of your real estate using the 4% yearly traditional increase and trace it back to the last big increase in your neighborhood. I see no simple solution to our present problem and the BS squawking on the TV for lower interest rates is NOT going to help us long term. We're probably best off riding this out and letting the markets adjust on their own w/o further government intercession, excepting the occasional move to stop full-blown panic such as the recent moves from ECB and the Fed adding liquidity.
