Here is the R&R paper referenced earlier:

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Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “This Time is Different, Again? The United States Five Years after the Onset of Subprime”

  1. KLeBrun says:

    A simpler analysis based on my 45 years in real estate and finance, including Wall Street and the mortgage industry…..

    We had a massive amount of cheap money chasing a limitted supply of real estate starting in 2001-2. We abandoned all underwriting criteria with subprime mortgages. If you were breathing long enough to sign a mortgage document you could get almost any amount that you wanted with no questions asked.

    The end result was a huge increase in real estate prices beyond normal replacement or market driven costs. Once the market collapsed in 2007 and prices returned to a more realistical level, we were faced with a massive supply of housing with debt that exceeded market value. The problem at that point was that massive defecit was beyond the nation’s capability financially to correct with any form of bailout.

    It will take us years to work our way out of this mess as the economy slowly recovers, housing prices slowly rise and home owners who have survived pay down their mortgage balances. Because the housing market is the 800 pound gorilla in the room in terms of the nation’s economy, we are unlikely to see a consumer driven recovery until the real estate situation resolves itself as noted above.

    All that we had to do to avoid this mess was to utilitze the mortgage underwriting criteria that had been established since the Great Depression. Financial institutions have analyzed millions of mortgages since the last disaster to arrive at underwriting criteria that has maintained mortgage defauls at acceptable levels until this latest financial orgy.

    And now they are fumbling with a new underwriting program for mortgages. Just pull out the old docs and read them. They worked.

  2. mlnberger says:

    KLeBrun: I commend your succinct, accurate, and precise summary of the cause of the Troubles that began in 2007. I believe many parties have added unnecessary levels of complexity to this root cause; I suppose this is because the consequences of this burst bubble has been so wide-ranging that everyone has seen the opportunity to achieve their favorite alterations to the economic system. I hope someday quiet, calm, informed voices such as yourself will one day dominate the conversation, but I am afraid those with the loudest voices and greatest megaphones will continue to monopolize the debate.