Comments on: Wall Street Waits for Fed and Whines About Bonuses http://www.ritholtz.com/blog/2009/01/wall-street-waits-for-fed-and-whines-about-bonuses/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 23:28:32 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: Moopheus http://www.ritholtz.com/blog/2009/01/wall-street-waits-for-fed-and-whines-about-bonuses/comment-page-1/#comment-142096 Moopheus Wed, 28 Jan 2009 03:48:54 +0000 http://www.ritholtz.com/blog/?p=17377#comment-142096 Since the regulators and politicians won't control Wall Street, and obviously Wall Street has about as much self-control as a teenager with dad's car, credit card, and a fake id, then Main Street has to do it. And there's only one way to do it: cash out. Take cash out of the banks and funds. Do not trade with them; don't buy or sell stocks, bonds, or other implements of destruction. Cut up your credit cards. Starve the beast. Do you see another way? "home buyers would be helped if the Fed decided to sit on mortgage rates....I’m just stating the case that to do so in the mortgage market would have a bigger impact on a central problem in the credit crisis — the implosion of home prices." No. Home buyers would be helped by the bubble deflating fully and prices becoming affordable again. The primary beneficiaries of the Fed policy is sellers and current homeowners to the extent that Fed policy supports prices remaining inflated. Recall that the Fed is buying up the Agency MBS by "creating new reserves," a policy that can't continue indefinitely without risking massive inflation later. What happens when the policy is changed, and the subsidy of mortgages is reduced? Will prices continue to decline? Unless the Fed policy creates substantial wage inflation, I'd think that likely. (I mean, it was loose credit and low interest rates that got us into this mess in the first place. Trying to refill the punch bowl is not the sane way out.) Which means that today's buyers risk taking a loss so that the schmucks who helped make this mess get bailed out. It is not surprising to me at all that mortgage bankers are seeing a much, much bigger increase in refi applications than in purchase applications. Since the regulators and politicians won’t control Wall Street, and obviously Wall Street has about as much self-control as a teenager with dad’s car, credit card, and a fake id, then Main Street has to do it. And there’s only one way to do it: cash out. Take cash out of the banks and funds. Do not trade with them; don’t buy or sell stocks, bonds, or other implements of destruction. Cut up your credit cards. Starve the beast. Do you see another way?

“home buyers would be helped if the Fed decided to sit on mortgage rates….I’m just stating the case that to do so in the mortgage market would have a bigger impact on a central problem in the credit crisis — the implosion of home prices.”

No. Home buyers would be helped by the bubble deflating fully and prices becoming affordable again. The primary beneficiaries of the Fed policy is sellers and current homeowners to the extent that Fed policy supports prices remaining inflated. Recall that the Fed is buying up the Agency MBS by “creating new reserves,” a policy that can’t continue indefinitely without risking massive inflation later. What happens when the policy is changed, and the subsidy of mortgages is reduced? Will prices continue to decline? Unless the Fed policy creates substantial wage inflation, I’d think that likely. (I mean, it was loose credit and low interest rates that got us into this mess in the first place. Trying to refill the punch bowl is not the sane way out.) Which means that today’s buyers risk taking a loss so that the schmucks who helped make this mess get bailed out. It is not surprising to me at all that mortgage bankers are seeing a much, much bigger increase in refi applications than in purchase applications.

]]> By: How the Common Man Sees It http://www.ritholtz.com/blog/2009/01/wall-street-waits-for-fed-and-whines-about-bonuses/comment-page-1/#comment-142087 How the Common Man Sees It Wed, 28 Jan 2009 03:34:16 +0000 http://www.ritholtz.com/blog/?p=17377#comment-142087 I've got a bonus for them...they get to keep their job. That would put them ahead of many Americans right now. I’ve got a bonus for them…they get to keep their job. That would put them ahead of many Americans right now.

]]> By: deanscamaro http://www.ritholtz.com/blog/2009/01/wall-street-waits-for-fed-and-whines-about-bonuses/comment-page-1/#comment-142042 deanscamaro Wed, 28 Jan 2009 02:02:44 +0000 http://www.ritholtz.com/blog/?p=17377#comment-142042 Couldn't have said it better. Why is there so much outrage about bonuses being cut from those who helped cause this mess? And why the retention bonuses? With the number of the unemployed and more being added from firms planning on more cuts, where would they go? Couldn’t have said it better. Why is there so much outrage about bonuses being cut from those who helped cause this mess? And why the retention bonuses? With the number of the unemployed and more being added from firms planning on more cuts, where would they go?

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