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strbear

Sub-prime Lender Says Problems Are On Scale Of Great Depression

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The chief executive of one of America’s biggest sub-prime mortgage lenders has predicted that the current “dislocation” in the US home loan market could be the most severe since the Great Depression in the 1930s.

Mark Ernst, chief executive of H&R Block, made the comments after it emerged that Cerberus Capital Managament, the US hedge fund, was in advanced talks to reduce the $1 billion price that it agreed to pay to H&R five months ago for one of its subsidiaries.

http://business.timesonline.co.uk/tol/busi...icle2358099.ece

Meanwhile, Freddie Mac, the American mortgage financier, yesterday admitted to a 45 per cent slide in profits during the second quarter of the year. It said that it had taken a $320 million hit over the period on new mortgages and reported net income of $764 million, down from $1.4 billion for the same period the year before.

RB 1 - Bulls Nil

B)

SB

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Actually, as this is the first time since the 1930's that house prices in the US have seen nationwide year-over-year declines, it's pretty much correct to argue that this is the worst housing market since the Great Depression.

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The guy has a vested interest in exaggerating the affects of sub prime hoping the government will step in and help them out their own mess.

Looks like it's a done deal already anyway. Wonder what Bush will say?

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Guest grumpy-old-man
Actually, as this is the first time since the 1930's that house prices in the US have seen nationwide year-over-year declines, it's pretty much correct to argue that this is the worst housing market since the Great Depression.

Some of us have been saying it's going to be as bad as the 1930's & the majority laughed, there have been several articles in the last few weeks with references to the last great depression. :ph34r:

Just wait & see, it's going to be really, really bad imo.

a post from yesterday

mentions the great depression.

Edited by grumpy-old-man

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GOM

To be honest that is now becoming my biggest fear - the bubble has gone on for so long when it comes off the rails we will all be hit whether we have been prudent or reckless. A correction in house prices that allows me to buy a nice home that I want is fine - a depression will not be good for anyone - its turning too black for my liking.

SB

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Some of us have been saying it's going to be as bad as the 1930's & the majority laughed, there have been several articles in the last few weeks with references to the last great depression. :ph34r:

Just wait & see, it's going to be really, really bad imo.

a post from yesterday

mentions the great depression.

Yes, people on here have been saying this for months.

Edited by Goldfinger

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I might need to apologise to the board for "Great Crash 2" which I have used to describe the current HPC and its knock-on effects. It may fail to adequately describe the gravity of the event which is unfolding. Years ago the now deceased Larry "Lawrence" Burkett, a popular radio economist in the US, predicted a "financial armageddon" which would precipitate the world's economies into a worse depression than the 1920's.

The relationship between WW1 and WW2 was used as an analogy for Great Crash 1 (1989-96) and Great Crash 2 (2007-). I fear this current crash will have no adequately analogous comparisons with which to compare. As lawyers would say it will be sui generis. One of a kind, uniquely horrible.

But now that Great Crash 2 seems to have stuck somewhat I am content to stick with it as it does, at least, distinguish it from its mild predecessor which now seems hardly worthy of "Great" in terms of crashes.

When the Sun use the "Crash" word as a front page headline the nation will wake up and realise the terrible folly so many have believed in and Brown's economic miracle of debt-driven HPI-MEW-BTL will turn into the worst nightmare imaginable.

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Guest grumpy-old-man
Yes, people on here have been saying this for months.

we might have really cheap houses again

The houses for 50p thread needs bringing up again I think for any newbiews watching.

ps - This was the first time I used the "depression" word & I have used it many times since. ;)

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Freddie Mac 'buy' mortgages and 'pools' them and 'sells' them on. They are 'privately owned' but 'sponsored by the US Government'.

F Mac and F Mae "created by Congress to pump money into the $8 trillion home mortgage market by buying banks mortgages and selling them on."

Reassurance is offered when the article states "combined they finance or guarantee two thirds of all American mortgages"

Freddie Mac - more formally the Federal Home Loan Mortage Corporation - buys mortgages, pools them and then sells them on as mortgage-backed securities. Although the company is privately owned, it is sponsored by the US Government and allowed to make loans and offer loan guarantees.

Freddie Mac, and its larger government-sponsored sibling Fannie Mae, were created by Congress to pump money into the $8 trillion home mortgage market by buying banks’ mortgages and selling them on.

Combined, Fannie and Freddie finance or guarantee about two thirds of all American mortgages. They are seen as more cautious than the lenders catering to borrowers with poor credit that have collapsed this year.

To really seal the foundation, the Democrats would like to take it a bit further:

Democrats in Congress want to raise the individual limit for home mortgages that Fannie and Freddie are allowed to buy as a way to help to stabilise the mortgage market.

...... :o:o:o

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Guest grumpy-old-man
GOM

To be honest that is now becoming my biggest fear - the bubble has gone on for so long when it comes off the rails we will all be hit whether we have been prudent or reckless. A correction in house prices that allows me to buy a nice home that I want is fine - a depression will not be good for anyone - its turning too black for my liking.

SB

hi strbear,

yes you are right. We have no choice in the matter.

The best result would have been a hpc with a mild recession, but that won't be possible.

For a long time now I have thought that we will have a depression, all the signs are there to see imo.

People laughing at cgnao's threads have no idea what's coming, financial armageddon awaits. :ph34r:

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I was reading Galbraith's account of the 1929 crash yesterday and it struck me as pertinent that the 1929 crash, according to Galbraith, began on September 3, the day after labour day 1929.

The equivalent day this year is next Tuesday.

I expect equities to have been decimated worldwide by the end of October.

It's a great book btw. Short, not difficult to read, and even funny in places:

http://www.amazon.co.uk/Great-Crash-1929-P...6048&sr=8-1

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GOM

To be honest that is now becoming my biggest fear - the bubble has gone on for so long when it comes off the rails we will all be hit whether we have been prudent or reckless. A correction in house prices that allows me to buy a nice home that I want is fine - a depression will not be good for anyone - its turning too black for my liking.

SB

I agree. It is grating to think that despite the fact that I have been prudent and not bought a massive house and shiny new car on credit, I too will get pulled into the ensuing mess. :angry:

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Guest grumpy-old-man
I agree. It is grating to think that despite the fact that I have been prudent and not bought a massive house and shiny new car on credit, I too will get pulled into the ensuing mess. :angry:

yes, but look at the positive side, at least you will be better off than the majority who will be debt laden for a long, long time. I understand your point though, you should be very comfortable & have no money worries if you have been prudent with your finances.

We have strived to be debt free entering into this.

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yes, but look at the positive side, at least you will be better off than the majority who will be debt laden for a long, long time. I understand your point though, you should be very comfortable & have no money worries if you have been prudent with your finances.

We have strived to be debt free entering into this.

My fear is the massive inflation that will result and erode my savings and hard work work whilst also eroding the debts of millions that need bailing out because of their own stupid excesses.

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I was reading Galbraith's account of the 1929 crash yesterday and it struck me as pertinent that the 1929 crash, according to Galbraith, began on September 3, the day after labour day 1929.

The equivalent day this year is next Tuesday.

I expect equities to have been decimated worldwide by the end of October.

It's a great book btw. Short, not difficult to read, and even funny in places:

http://www.amazon.co.uk/Great-Crash-1929-P...6048&sr=8-1

"Black Tuesday?"

I agree in relation to October. I have always considered October to be the month to not be in shares. The corrections we have had so far are pre-shocks IMO. We have to remember one outstanding feature of Great Crash 2: you cannot have a recession in the main driver of an economy without a significant spill over effect on everything else. Houses are going down and they represent 60-70% of spending. When it dries up the economy dries up. When it crashes the economy crashes. The VIs need to be TOLD by the regulating authorities to cut the crap and tell it like it is--at least RICS and the NAEA have admitted things are no longer rosy for houses.

I am about 90:10 in cash:stocks and may take this opportunity to go 100% cash. However, with bailouts on the horizon Goldfinger may be proven to be correct. The only problme is that you can't eat the yellow stuff and people will be too broke to buy it from you.

http://uk.biz.yahoo.com/31082007/325/hopes...ope-shares.html

Hopes for Bush subprime help boosts Europe shares
LONDON (Reuters) -
European shares rose early on Friday
, mirroring a broad rally in Asia as investor hopes mounted for dual action from the Federal Reserve and the U.S. government to help ease the subprime lending crisis.

Hope springs eternal.

Edited by Realistbear

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I was reading Galbraith's account of the 1929 crash yesterday and it struck me as pertinent that the 1929 crash, according to Galbraith, began on September 3, the day after labour day 1929.

The equivalent day this year is next Tuesday.

I expect equities to have been decimated worldwide by the end of October.

It's a great book btw. Short, not difficult to read, and even funny in places:

http://www.amazon.co.uk/Great-Crash-1929-P...6048&sr=8-1

Autumn Crashes

"There is a tendency for major crashes to occur in the Autumn, especially October.

September 18th 1873, October 29th 1929, October 6th 1932, October 18th 1987, October 13th, 1989. Of the fifteen largest one-day declines in the Dow-Jones average since 1928, ten fell between September 24th and November 11th."

Extracted from The Great Reckoning by William Rees-Mogg and James Dale Davison, first published in 1992

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The guy has a vested interest in exaggerating the affects of sub prime hoping the government will step in and help them out their own mess.

I agree with this observation.

What I would be interested to hear from all you doomsters is how you think the Fed, BofE and every government in the world is going to (try to if you prefer) screw up your apocolyptic vision. As sure as hell they will try. Why can't they win - even though some serious damage may result? You all seem to think this is a one way bet and I find it hard to swallow that.

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hi strbear,

yes you are right. We have no choice in the matter.

The best result would have been a hpc with a mild recession, but that won't be possible.

For a long time now I have thought that we will have a depression, all the signs are there to see imo.

People laughing at cgnao's threads have no idea what's coming, financial armageddon awaits. :ph34r:

The HPC/Mild recession option, I think was passed some years ago, it seems that the big VI's, Governments and Central banks have all been working in cahooch to keep asset prices and profits high for the mega rich and big companies at the future expense of everyone else. I think there are so many people out there who are going to be shocked, particularly those who have never been though a recession with real/longterm unemployment that many of us went through in the 70's and 80's, however I believe this is going to be worse as 'They' have become much clever'er at diverting the minor busts and now we will get them all in one big serving.

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My fear is the massive inflation that will result and erode my savings and hard work work whilst also eroding the debts of millions that need bailing out because of their own stupid excesses.

Mine too. I know there are plenty of reasoned economic arguments against that route being taken, but reason seems to have been missing from the economic landscape for years, and given the choice between p!ssing off savers and p!ssing off indebted home 'owners', I think I know which would be chosen.

Time to buy a house? ;)

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I agree with this observation.

What I would be interested to hear from all you doomsters is how you think the Fed, BofE and every government in the world is going to (try to if you prefer) screw up your apocolyptic vision. As sure as hell they will try. Why can't they win - even though some serious damage may result? You all seem to think this is a one way bet and I find it hard to swallow that.

....the headline to the article hid the real story re FM & FM, who will now be used as a lifeboat to rescue the sub prime disaster .....Rupert's way of being discreet........ :lol::lol::lol::P

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Guest grumpy-old-man
The HPC/Mild recession option, I think was passed some years ago, it seems that the big VI's, Governments and Central banks have all been working in cahooch to keep asset prices and profits high for the mega rich and big companies at the future expense of everyone else. I think there are so many people out there who are going to be shocked, particularly those who have never been though a recession with real/longterm unemployment that many of us went through in the 70's and 80's, however I believe this is going to be worse as 'They' have become much clever'er at diverting the minor busts and now we will get them all in one big serving.

they have become more clever BUT also the people have been dumbed down over the last decade, bought off with hpi providing their shiny new things.....they deserve everything they get imo.

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In the short term the world will enter depression, in the longer term the Eastern world will clamber out of that depression in much better condition than the West and come to dominate.

We are at the beginnings of an historical paradigm shift.

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Ditto; I think this scenario needs a sticky thread!

My fear is the massive inflation that will result and erode my savings and hard work work whilst also eroding the debts of millions that need bailing out because of their own stupid excesses.

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