Tuesday, Aug 17, 2010
US preparing a housing-finance overhaul
Bloomberg: Pimco's Gross Urges `Full Nationalization' of Housing Finance
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. should consider “full nationalization” of the mortgage- finance system as the Obama administration plots the revival of a market that was at the center of the 2008 credit crisis. “To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,”
Posted by jack c @ 09:32 PM (896 views) Add Comment
7 Comments
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1. enuii said...
Once bitten twice shy, now who wants the baby?
2. mander said...
This is communism. Goverments must not intervine as it manipulates the market in favour of a certain category of people.
3. Salamander said...
Or in other words, "Please buy all of my cr*ppy mortgage bonds and make me whole. I don't care who has to pay for my poor investment decisions so long as it's not me"
4. mountain goat said...
The headline says he is recommending nationalisation, but Bill Gross' point makes sense from a private investor's point of view. Who in their right mind would lend that amount of money to someone to buy a house when they have no deposit and therefore no risk?
Reuters -
"Without a government guarantee, mortgage rates would be hundreds -- hundreds -- of basis points higher, resulting in a moribund housing market for years," Gross said.
He said PIMCO would not consider investing in a private, or privately insured, mortgage pool unless it was accompanied by 30 percent down payments -- far above the current norm.
Zero Hedge -
"During the live hearing, Bill Gross stated the obvious: private players in the MBS space will never participate as long as long as the government accepts zero down payments. Of course, he is absolutely correct - the only entity stupid enough to gamble with its seemingly endless resources in such a manner is the US government. And in doing so, it continues to widen the schism between public and private interests, and makes the return of private businesses in this most important segment of US credit markets an impossibility. In fact, Gross urged a move one step further, with the full nationalization of the GSEs - as the GSEs are nationalized now in all but writing, this would be logical. Alas, the fact that US Debt to GDP would jump from 90% to 140% may make this proposal a little difficult to implement."
5. general congreve said...
Can only dream they do it, the resultant effect on sovereign debt, and therefore, the gold price would be fantastic.
6. uncle tom said...
The Americans have been here before of course - Fannie and Freddie were creations of the state.
Strange that a country that worships private enterprise and finance, and has been singularly alergic to socialist theory in all its forms; has such a problem when it comes to privately financing mortgages in a measured and responsible manner.
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