Friday, August 17, 2007

 

Repent Now!!

Steve Pearlstein is at it again as he calmly lays out what is going on right now:

“What we have on our hands here, folks, is a full-blown, global financial crisis comparable to the junk bond collapse of 1987, the S&L crisis of 1990 or the Asian financial crisis of the late '90s.” No Time To Sit and Watch - washingtonpost.com

He takes special note of St. Louis Federal Reserve Board President, Bill Poole as he:

tell[s] Bloomberg News that it would only "upset the market" if the Fed were to "change course in any fundamental way" before there was proof that market turmoil was actually having an impact on the real economy.”

Apparently, Mr. Poole is an idiot because he doesn’t want to rush into any quick fixes. To be fair, I am only inferring that Mr. Pearlstein doesn’t think much of Bill Poole because he refers to him as “a stridently right-wing academic”. Loyal readers of Steve Pearlstein will recognize that as as low a blow as he can muster. He doesn’t explain exactly why he considers the St. Louis FRNB President as stridently right-wing but I’m going to guess it’s because Mr. Poole once served on President Reagan’s Council of Economic Advisers and recently had some nice things to say about Milton Friedman .

Steve Pearlstein also remains unhappy with the lack of an increasing role for Freddie Mac and Fannie Mae in all this:

“…the Bush administration still stubbornly refuses to allow Fannie Mae and Freddie Mac the latitude to fulfill their core mission and provide liquidity to these markets when private lenders and investors retreat.

“With the stroke of a pen, James B. Lockhart, director of the inelegantly named Office of Federal Housing Enterprise Oversight, could free Fan and Fred to borrow more money and buy up more mortgages at a time when rising rates for even prime borrowers are putting extra burdens on a housing market already struggling with excess inventory, declining sales and falling prices.”

Well, as Mr. Lockhart recently explained in a letter to Senator Schumer:

“Raising portfolio caps would allow the Enterprises [Fannie Mae & Freddie Mac] to purchase mortgages in this market segment, but would not respond directly to those segments having the most significant difficulties.”

Most laughable though is the follow-on caveat to the so-called “stroke of a pen” solution:

“It is true, as Locky noted in his letter to Fan and Fred, that their legislative charter prevents them from participating in several segments of the mortgage market that are experiencing problems, particularly the market for "jumbo" loans over $417,000.”

But Mr. Pearlstein firmly believes that if only the Bush Administration would signal an intention to work with Congress – after Labor Day – to rectify these procedural hurdles, there could be peace in the valley. That’s right, put that on the agenda for September…because this is no time to sit and watch.

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