The Following Is The Text Of A Letter Sent By Federal Reserve Chairman Ben Bernanke To Sen. Charles Schumer.

[BENEFIT SPONGER]

Bernake wants to create another crisis,they are suggesting that FNM and FRE come up with new clever types of mortgages that will make these overpriced houses bought by people who knew they couldn't afford them, miraculously affordable with a flick of a pen.

The idea is still that the equity in the houses will go up and then the homeowners can pay back the reduced monthly payments.ANYTHING TO KEEP THE BUBBLE GOING.

The following is the text of a letter sent by Federal Reserve Chairman Ben Bernanke to Sen. Charles Schumer.

The twelve Federal Reserve Banks around the country are working closely with community and industry groups dedicated to reducing the risks of foreclosure and financial distress among homebuyers. The Board is also engaged in these issues; for example, Governor Randall Kroszner serves as the Federal Reserve’s representative on the board of directors of NeighborWorks America, which has a program to encourage borrowers facing mortgage payment difficulties to seek help by making early contact with their lenders, servicers, or trusted counselors. And as I noted in my testimony in July, in order to strengthen consumer protections, the Federal Reserve Board is currently undertaking a comprehensive review of the rules regarding loans subject to the Home Owner Equity Protection Act as well as some rules pertaining to mortgage-related disclosures under the Truth in Lending Act.

It might be worth considering at this juncture whether the private and public sectors, separately or in collaboration, could help the situation by developing a broader range of mortgage products which are appropriate for low-and moderate-income borrowers, including those seeking to refinance. Such products could be designed to avoid or mitigate the risk of payment shock and to be more transparent with respect to their terms. They might also contain features to improve affordability, such as variable maturities or shared-appreciation provisions for example. One public agency with considerable experience in providing home financing for low-and moderate-income borrowers is the Federal Housing Administration (FHA). The Congress might wish to consider FHA reforms that allow the agency more flexibility to design new products and to collaborate with the private sector in facilitating the refinancing of creditworthy subprime borrowers

facing large resets.

http://blogs.wsj.com/economics/2007/08/29/...ter-to-schumer/

[sunonmars]

When the hell are they going to get it into their thick heads. If you cant afford it, you should not buy it. Has the whole fecking world gone to cloud cuckooland.

[Realistbear]

There is a forming consensus of opinion that the next HPC will usher in the next Great Depression. I think that view is the correct one. Massive asset price deflation will suck money out of the system faster than Brown will be changing NuLabour's policy on immigration.

Ben had been saying he would not bail people out of their mistakes. He now realises the size of the mistake. Fing is, Gordon's "mistake" is twice as bad.

Great Crash 2 is the big one.

[Minos]

There is a forming consensus of opinion that the next HPC will usher in the next Great Depression. I think that view is the correct one. Massive asset price deflation will suck money out of the system faster than Brown will be changing NuLabour's policy on immigration.

Ben had been saying he would not bail people out of their mistakes. He now realises the size of the mistake. Fing is, Gordon's "mistake" is twice as bad.

Great Crash 2 is the big one.

Do you think the $$$ will survive the Greatest Depression ?

[ae589]

He wants easier terms than covenant-lite, low interest rate and no income proof?

Why is he writing to a Senator? Only God or Santa Claus can save them now.

[Realistbear]

Do you think the $$$ will survive the Greatest Depression ?

The myth that the US currency can dissappear without a commensurate impact on the rest of the world is, well, a myth. The US economy is the largest in the world. The State of California alone is the world's 8th largest economy. The US have natural resources that rival any other nation on the planet and they have the largest food producing capability. They ain't going away anytime soon. No, we are far more vulnerable to a depression as we lack natural resources and owe more per capita than any other nation on the planet. Gordon has destroyed our manufacturing base and with it the ability to build a recovery when the time comes. He has "sold us out" for the sake of HPI and an expanded civil service.

If we go into a 1929 scenario the US will go down too but they will be first out.

[@contradevian]

If we go into a 1929 scenario the US will go down too but they will be first out.

I wouldn't underestimate the US either. Its the "mini me" government and economy here I worry about.

Edited August 30, 2007 by rover2000

[South Lorne]

The Congress might wish to consider FHA reforms that allow the agency more flexibility to design new products and to collaborate with the private sector in facilitating the refinancing of creditworthy subprime borrowers

facing large resets.

http://blogs.wsj.com/economics/2007/08/29/...ter-to-schumer/

........the whole article falls down on the last six words...'creditworthy subprime borrowers facing large resets'.....surely a contradiction in terms...or is it just that these people who brought us the phrase 'war on terrorism' are just a bit short of the full shilling.....

Edited August 30, 2007 by South Lorne

[dstars]

The following is the text of a letter sent by Sen. Charles Schumer to Federal Reserve Chairman Ben Bernanke.

Dear Benji,

I thought we agreed it was over? Now I find you scratching once more at my soul. It’s not fair I tell you! You, trapped in that accursed bank every night printing greenbacks, and me , by the fire, listening to my colleagues as they repeat the same sentences over and over until I think I might go mad.

I can’t stop thinking of you Benji, my bed is cold but my heart is melting. I can live without you no more. Bring sacks of cash; plenty, for who knows what it might be worth in the fullness of time?

I miss you, my love, my life,

Your dearest Chu-chu.

Edited for stayul

Edited August 30, 2007 by dstars

[Goldfinger]

Do you think the $$$ will survive the Greatest Depression ?

Fiat currencies would all go down together as long as they are only backed by Dollars! They would in different speeds, though. The only solution to decouple from the USD is backing by something else.

[ae589]

The only solution to decouple from the USD is backing by something else.

But.... what?

[bomberbrown]

Actually, this is quite worrying. What happens when people can't afford their mortgage payments, so the bank extend the mortgage over 50 years rather than 25 years in order to reduce the monthly payments?

What impact would that have on the economy?

[dstars]

Fiat currencies would all go down together as long as they are only backed by Dollars! They would in different speeds, though. The only solution to decouple from the USD is backing by something else.

Who told you fiat currencies are backed by dollars? And I thought my post was crazy.

What currency is not fiat? I know there are a few that are tied to the dollar but it sounds like you think the dollar backs everything; it doesn't.

Different speeds? Whazzat?

Edited August 30, 2007 by dstars

[dstars]

I just read the orginal post. My reply from the senator makes just as much sense as Bernanke's letter (but at a different speed).

[thecrashingisles]

Actually, this is quite worrying. What happens when people can't afford their mortgage payments, so the bank extend the mortgage over 50 years rather than 25 years in order to reduce the monthly payments?

What impact would that have on the economy?

The mortgage payments can't be lower than I/O without the size of the mortgage increasing month by month. Extending the length of the mortgage doesn't make any difference unless it's a repayment mortgage.

[?...!]

US strategists needed money to fight an economic war to protect your way of life. They took this money from your future.

Property was the vehicle through which this funding was acquired.

The Western population must now do the work, to generate the wealth, they have already spent. And it costs an awful lot of money to delay a recession.

[dstars]

The mortgage payments can't be lower than I/O without the size of the mortgage increasing month by month. Extending the length of the mortgage doesn't make any difference unless it's a repayment mortgage.

I saw this in the aftermath of the Mexican peso crisis. It won't work. They couldn't even sell it to peasants over there and our peasants are only marginally more stupid than Mexican peasants. It's looney and I don't believe they believe it'll work; they're just trying to buy time.

It's bluster; nowt else.

[Starcrossed]

On the subject of the $$$ and the next Depression, I have been swayed by an old thread on here (DrBubb?) that drew parallels between the Great Depression and the rise of the USA to worldwide superpower. The same period saw the rapid decline of the £££ and the UK as world superpower.

So we had a paradigm shift born out of crisis that was founded in a speculative boom.

Could the same thing happen again? The US is overstretched (financially and in military terms) all empires come to an end sometime, the oil issue, and finally where the USA was the world's creditor in 1945, today it is China.

It is quite a powerful argument.

Against this, we have the likelihood of continuing US innovation and dynamism and increasing environmental and food production problems in China and other places.

On balance I would say that the debt issue is big enough to properly shake things up with an uncertain future for the $$$ and those that sail in her (including the UK)

[Furby]

The Dollar may well go - Amero anyone?

I too think depression - Uk PLC will be the worse place to be. As others have said the US still makes things and has lots of natural resources. We have feck all.

F

[Wad]

Well I think the plan to rescue the US housing market is pretty much out there now.

Such products could be designed to avoid or mitigate the risk of payment shock and to be more transparent with respect to their terms. They might also contain features to improve affordability, such as variable maturities or shared-appreciation provisions for example.

The plan is basically is to allow homeowners to roll up interest payments on IO mortgages out to an infinite horizon (i.e a rent) in the hope that one day the capital value of the house will exceed the capital value of the loan secured on it. It really is as simple as that.

Unfortunately, at current interest rates house prices might not go up fast enough to cover the rising value of the compounded interest. The only way to deal with that problem is collapse interest rates to zero to stop the compounding. Unfortunately, they tried that in Japan and banks just kept mortgage rates high because the fear of default was so high - even though the banks were borrowing at near zero interest rates themselves from the BOJ.

Oh well .... back to the drawing board. Maybe sending homeowners bundles of cash through the post might work?

[bomberbrown]

Well I think the plan to rescue the US housing market is pretty much out there now.

Such products could be designed to avoid or mitigate the risk of payment shock and to be more transparent with respect to their terms. They might also contain features to improve affordability, such as variable maturities or shared-appreciation provisions for example.

The plan is basically is to allow homeowners to roll up interest payments on IO mortgages out to an infinite horizon (i.e a rent) in the hope that one day the capital value of the house will exceed the capital value of the loan secured on it. It really is as simple as that.

Unfortunately, at current interest rates house prices might not go up fast enough to cover the rising value of the compounded interest. The only way to deal with that problem is collapse interest rates to zero to stop the compounding. Unfortunately, they tried that in Japan and banks just kept mortgage rates high because the fear of default was so high - even though the banks were borrowing at near zero interest rates themselves from the BOJ.

Oh well .... back to the drawing board. Maybe sending homeowners bundles of cash through the post might work?

Woo Hoo! The Japanese way it is then. Deflation here we come, cash is king!

[nigwell]

There is a forming consensus of opinion that the next HPC will usher in the next Great Depression.

That'll be Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey & Turkey Lurkey then.

[oktup]

Oh well .... back to the drawing board. Maybe sending homeowners bundles of cash through the post might work?

MIRAS?

Although that would obviously collapse the wave function into an inflationary cat, so probably a Last Chance Saloon type of strategy...

[Goldfinger]

Who told you fiat currencies are backed by dollars? And I thought my post was crazy.

What currency is not fiat? I know there are a few that are tied to the dollar but it sounds like you think the dollar backs everything; it doesn't.

Different speeds? Whazzat?

They effectively all are. Because the central banks' reserves are mostly Dollars, or other paper currencies that have themselves again mostly Dollars in their vaults.

Edited August 30, 2007 by Goldfinger

[Sebastian]

Quote from same letter:

'Also, the Federal Open Market Committee has stated that it is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.'

Markets read this as meaning Bernanke was intimating rates cuts and was said to have sparked the major rally seen on the Dow Wednesday. He speaks tomorrow in Wyoming but it would be a major surprise were he to show his hand outside of an official FOMC meeting. It would be a huge mistake for him to give anything away. US Stock markets are hung up on idea that the Fed carry a magic wand. It is definitely becoming a Wall Street Vs the Fed battle of rates, with Main Street being left to look from around the block.