And we aren’t even halfway through this mess, IMO.

From my perspective, the problem is not really the inflated prices of homes, although that is a significant part of it – no, the real, underlying monster beneath the bed in this house is the ficticious capital that was created r-e-l-y-i-n-g upon those inflated home values as being real.

Regardless of the spin, no one is actually trying to save homes or homeowners – what they are trying to save is the trillions of fake dollars stacked like logs upon a smoldering funeral pyre. This is the unspoken reasoning behind all the Fed alphabet soup of programs.

Look at the ABCP outstanding – it fell about 50% from last July. Is there any reason to believe that the 50% remaining is liquid? If it is not liquid, and there is no market for it, is it really money? I would say no. At least not all of it. It has no transactional value, so it cannot be considered real money. MZM is overstated because of this misunderstanding, counting all of the non-transactionable capital as it were real, existing money. That concept also helps understand why in this deleveraging process the Fed pumps have not prevented the slide in equities prices – fictional capital has been destroyed faster than the Fed has been able to recreate it.

A recent Reuters story stated that 60% of the nation’s mortgage holders are underwater – for a homeowner who can afford his mortgage payment and lives within the means provided by his income, this is not really important. It is only critical if you have previously borrowed or leveraged on top of the ficticious equity, then borrowed again off of that, then again, etc.

Leverage is great if you are on the right side of the trade – it sucks big-time if you are wrong. And the greater the leverage the less margin for error until you go broke.

Barry is right in that home prices simply have to fall – but against that backdrop are the guardians and keepers of the ficticious capital monster, those who would fight tooth and nail all the way down to continue to feed and nurture their falsely created demogogue beast.

At least, that’s how I see this elephant….

How does “saving” any homes not reward lenders and home buyers, at the expense of those were had no involvment whatsoever?

What the housing market NEEDS is an economy not hooked on foreign capital and slave labor.

Linda explained that I could count as income the Worker’s Comp settlement I was receiving from the fryer accident, as well as the anticipated flood of tipjar income from a totally awesome blog post idea I’ve been thinking about. Using a sophisticated financial computer math program, she demonstrated how I could minimize my payments by selecting the 200-year interest-only ARM. The only formality was the credit check, and my TransUnion score was more than adequate after adding in the scores of my cosigners Kyle and Chuck.

One way to thwart the thieves…

First, the idea that buyer fraud is the main driver of the problem is absurd. Second, that sentence doesn’t even make sense. Bailouts are need when fraud enters the system? Huh?

imo, banks appear to be hoarding credit b/c of the ~$30 to $60 trillion CDS market, a workout which looms in the future. what was Lehman’s settling? $.0825/$1?

if the housing market issue was banks worrying about fraud, then simply reverting to the standards for home loans used in say 1989 would fix the problem; worried about fraud, then require 750+ credit scores and 20% down. a 2/28 loan? did that even exist in 1989?

meanwhile, allowing the value of homes to bottom naturally will price-in reality. the housing market was gamed for a long time. i know what i paid for my house, i know what it is worth to me, and yet my 2009 tax assessment (in TX) was +$30K above what i would assign as its value. our system from government down to owner has priced in a value that is not in keeping with reality.

the only reason i can see a bailout being floated is that is stops the pain; that is the real problem – no one wants to hurt for the fix to a system out of control.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aGYlBrRCgtq0&refer=home

The realtor and her fiance didn’t have a moral compass to guide them, they looked for ways to cheat the system and this couple figured out a way to use “straw” buyers to purchase 227 properties worht $107 million in Nevada. This is just 2 people that new how the system worked. My guess is there are lot of people that did this nationwide and a big chunk of the home foreclosures can be linked to fraud rather than Joe the plumber loosing his house. This fraud in the system is a key trigger to credit getting shut off and the only way to restore the balance of private capital that was pulled from the system is to have the government come in and replace that capital until free markets work through the fraud issues and the free market system starts up again because there is money to make in banking and lending and you the quests for profits always comes back in to play.