Just Say AAA: PAUL KRUGMAN - Housing Bubble; FRANK RICH - Wider Cheney Plot + by PAUL KRUGMAN - THE NEW YORK TIMES Monday Jul 2nd, 2007 KRUGMAN: The housing bubble, like the stock bubble before it, is claiming a growing number of innocent victims. COHEN: Tax authorities in the United States and Britain have lost touch with the super-rich, as has most of humanity. THE COMPLETE ARTICLES AND MORE
--> OP-ED COLUMNIST Just Say AAA By PAUL KRUGMAN Published: July 2, 2007 What do you get when you cross a Mafia don with a bond salesman? A dealer in collateralized debt obligations (C.D.O.s) someone who makes you an offer you dont understand. Seriously, its starting to look as if C.D.O.s were to this decades housing bubble what Enron-style accounting was to the stock bubble of the 1990s. Both made investors think they were getting a much better deal than they really were. And the new scandal raises two obvious questions: Why were the bond-rating agencies taken in (again), and where were the regulators? To understand the fuss over C.D.O.s, you first have to realize that in the later stages of the great 2000-2005 housing boom, banks were making a lot of dubious loans. In particular, there was an explosion of subprime lending home loans offered to people who wouldnt normally have been considered qualified borrowers. For a while, the risks of subprime loans were masked by the housing bubble itself: as long as prices kept going up, troubled borrowers could raise more cash by borrowing against their rising home equity. But once the bubble burst and the housing bust is turning out to be every bit as nasty as the pessimists predicted many of these loans were bound to go bad. Yet the banks making the loans werent stupid: they passed the buck to other people. Subprime mortgages and other risky loans were securitized that is, banks issued bonds backed by home loans, in effect handing off the risk to the bond buyers. In principle, securitization should reduce risk: even if a particular loan goes bad, the loss is spread among many investors, none of whom takes a major hit. But with the collapse of the $800 billion market in bonds backed by subprime mortgages the price of a basket of these bonds has lost almost 40 percent of its value since January its now clear that many investors who bought these securities didnt realize what they were getting into. --MORE-- http://mparent7777-2.blogspot.com/2007/07/just-say-aaa-paul-krugman-housing.html Posted by CRIMES AND CORRUPTION OF THE NEW WORLD ORDER NEWS mparent7777 Marc Parent CCNWON Labels: banks, bonds, bubble, C.D.O., economy, financial markets, housing, mortgages, New York Times, News, PAUL KRUGMAN, Politics, stocks, Subprime loans When the Vice President Does It, That Means Its Not Illegal: FRANK RICH - Wider Cheney Plot http://mparent7777-2.blogspot.com/2007/07/when-vice-president-does-it-that-means_02.html The Filthy Rich Are Different From You and Me: ROGER COHEN http://mparent7777-2.blogspot.com/2007/07/filthy-rich-are-different-from-you-and.html CRIMES AND CORRUPTION OF THE NEW WORLD ORDER NEWSWIRE - JULY 1, 2007 http://mparent7777-2.blogspot.com/2007/07/crimes-and-corruption-of-new-world.html AND MORE http://mparent7777-2.blogspot.com/ http://www.wakeupfromyourslumber.com/blog/38 --------------------------------- Be smarter than spam. See how smart SpamGuard is at giving junk email the boot with the All-new Yahoo! Mail
