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Santelli Introduces Subprime 2.0
In his first major speech since The White House got their 'flexible' man in to manage the GSEs, Mel Watt outlined his strategic plan for Fannie Mae and Freddie Mac. Predicated on the maintenance of liquidity, competition, and resilience of the national housing finance market, Watt's remarkably blind to the past proposal will, as CNBC's Rick Santelli warns, create Subprime 2.0. Easing lending standards, not lowering limits, and raising the possibility of principal reduction seems to do anything but reduce taxpayer risk and merely creates more perverse incentives. Santelli steams, as the orthodox monetary policy channel of the last 30 years continues to be pumped ever higher, "immense fiscal and monetary stimulus has gotten us nowhere." As we suspect Rich might have concluded... Watt the fuck!? "if you believe any of this, you have to be crazy after what we've been through."
Santelli and Alhambra's Jeff Snider explain how monetary policy uses housing as its funnel...
"the piggy bank becomes this faux appreciation that gets funneled in a house that becomes an ATM on the "wealth effect"
"The major economic orthodoxy is aggregate demand. The way you fill demand is through credit and debt.
So the primary channel, and all the orthodox literature agrees, for aggregate demand in this framework is through housing.
For the last 20, 30, 40 years the monetary policy of this country and around the world really has been dedicated to using housing as a way to increase economic growth... but it's incredibly inefficient.
That's what we've seen with bubbles, that's what we've seen with asset inflation and prices... the fact that it takes an immense credit production capacity to create even just a little bit of economic wealth."
And then Santelli goes off on Mel Watt's plan... starting at 1:50...
As former FHFA boss Ed DeMarco warned, "do not confuse weakening underwriting standards & underpricing risk with helping people or promoting market efficiency" - it seems Mel Watt doesn't give a shit... Santelli screams to Congress - welcome to Subprime 2!
As Santelli concludes...
"if you believe any of this, you have to be crazy after what we've been through."
Of course - as we noted here - is this what's coming next to the US?
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Of course, Hedge Funds need an easy market to dump into!
Subprime 2.0 is contained.
Mr. Ben Dover, avergae merikan needs to stock up on moar KY.
Be better prepared next time with moar lube 'cause it's gonna hurt moar some peeples say.
Ultimately this will not end well...the can is wearing out.
'Reform' is the new smoking.
Reform = re-inflating the real estate bubble... Merkans need MOAR cheap credit...
Actually it will work for a while; transiting Jupiter is in America's 8th house of debt/credit, while Saturn has just entered the US 12th House of self-undoing. Both will be out by mid to late 2015, and the crash will be apparent by 2016. Along with the complete "nervous breakdown" of the US Democrat Party (another chart of their own).
I understood what you wrote, but haven't looked at those kinds of charts lately. ;)
"Watt the fuck say?"
Bring back Subpwime Barney Fwank.
Is he top or bottom?
I dont play his game but I got to imagine bottom.
Squeal like a pig Barney!!!
Insanity- Doing the same thing over and over and expecting different results.
How to stage a financial coup and gut a country: Do the same harmful thing over and over in the expectation of achieving the same desired result.
"immense fiscal and monetary stimulus has gotten us nowhere."
Regardless of all other perspectives, it is astonishing that anyone can contort their thinking and somehow dismiss this.
Even with all his drawbacks and obvious conflicts of interest, I'm still glad Rick's out there saying this stuff.
Well the banks just want all the fees involved...it does not matter if you can pay it back.....like student loans...and the Politicians can buy votes with this...the lowlifes can get a loan..and walk on it...its free Obama money baby....they deserve it..just ask them
Bnaks are not on the hook for it so hand out OPM to anyone who can Fog a mirror...and then some.
Load up every crevice of the economy with debt. It's the Federal Reserve bankster's plan. Infinite debt.
How else does one create the backstop for a global currency?
"We owe it to ourselves."
"...allow more leverage, essentially, into MBS [Mortgage Backed Securities] trading."
BINGO!
I think you mean "quality collateral" creation.
Here comes $500K mortgages for a household with $200K in student loans and $100K annual income.
exactly. the student loans will not be counted in your back end ratios in order to qualify you or only a percent thereof in order to be able to manipulate qualification.
this is the end game manipulation to try and get the economy moving. even those foreclosed in the past, bankrupt in the past will have it overlooked. final debasement
Maybe Obomb-ma should include another bullet point on his youth financial education list. Not only do you 'need' health insurance, you 'need' a mortgage....
Let them eat OSB
suck a dick Barry!
That would be pleasurable for him. You might be better off telling him to eat a vagina. he would find that repulsive.... especially if it's a wookie's.
Some one buy that guy a drink or 2. Fucking preach. Too bad no actually watches CNBC.
And for those that do, I bet the only time they turn the volume up is when Rick is ranting.
I hope they loosen lending standards up. The sooner they do the sooner this shit falls apart. With the amount of reserve sitting on balance sheets inflation will really get interesting when the fractional reserve system gets cranked up again.
Couldn't agree more. Open up the damn faucets.
Well, other than "fall apart" equaling WWIII, I'm with ya.
Then there's that pesky martial law stuff.
I wonder, if martial law is declared, will they have to stop evictions while we're all "sheltering in place?"
There's no stopping it. It's best to meet our destiny head on than to prolong the agony.
You've got kids too, I take it.
but no jobs
Think they have already demonstrated what they will do to those who shelter in place:
http://www.youtube.com/watch?v=6tpAZObNZfI
Yea! I say bring on sub prime so i can off load the remaining properties I own. Nothing brings out the know it alls like free money. What was that qualifier , oh yea " fog a mirror get a loan"
Sell into a upward trend.
To anyone who thought it was the free markets and not the government that caused the last bubble, please note.
Certainly this time it will end better when people start intentionally taking out loans they can't repay again.
The fun part is in doing the replay of the last crash, instead of doing something so old fashioned as drastically ramping the Fed Funds rate like they did back in 2006 in order to induce the variable rate crash domino, now all they have to do is slow down/stop QE. It's literally the exact same fucking playbook in every other way.
We've had a short lull in monetary destruction, including the Fed "tapering". However, this idiot Mel Watt is giving us the first signal in Obama Stimulus 2.0. Wait until Chicago and, for that matter, the entire state of Illinois defaults on its bonds or pension obligations. I think Chicago is close to junk bond status. Brown in California has just released a "good times" budget with huge deficits and balloon payments on State pensions on the horizon. Los Angeles is only a short time away from collapse as well. Sometime in this decade 2/3rds or more of the city budget will go to pensions and free medical for all these "servants". The rest goes to illegals, soon to be citizens at the hands of the Democrat Socialist party and its whores in the other party. Street repair -- forget it.
CONgress and reform?
Rick, they want to create another bubble.
They don't give a damn about the economy or their constituency, just their benefactors.
Say it Rick, say it. You're almost there...
"immense fiscal and monetary stimulus has gotten us nowhere"
Translation:
Immense fiscal and monetary stimulus is counterfeiting and theft only benefits the thief!
A rose is a rose...
I don't see a fucking thing wrong with principal reductions.
The banks don't care as much about principal reductions as they do interest rate adjustments. Sure we will be magnanimous and knock $10,000 off your $200,000 loan just so long as we keep the rate at 6% we are all good.
I don't know when this insanity ends, I just know it ends VERY, VERY, VERY, badly.
Oh Crap! France says we only have 500 days left to prevent climate chaos:
http://www.weeklystandard.com/blogs/french-foreign-minister-500-days-avoid-climate-chaos_792736.html
I hope you all have your affairs in order.
How long will it take this time til the bubble pops?
Is it just me or is it an abnormally slow news day?
I like this post about Santelli and Housing Bubble 2.0, but things seem quiet, too quiet.
The big show starts on the new moon. Two theaters: China Sea, Ukraine. The chess pieces are in place. Unfortunately, the weather moves from west to east. I'm reminded of the tent scene in "The Illustrated Man" wherein the council has agreed the the end of the world is tonight. Nice knowing you ebworthen. The reconstructionists of the future will see your postings and know that you tried.
they equate zirp with lowering unemployment why shouldn't they equate currency debasement via junk bonds with helping people?
SO THIS MOVE TO SUBPRIME 2.0 IS FROM DESIGN - IT IS A CALCULATED MOVE.
THIS TIME THEY ARE HOPING TO BRING DOWN THE ENTIRE AMERICAN ECONOMIC EDIFICE WHEN THEY IMPLODE THIS BUBBLE.
THIS IS THE LAST STEP BEFORE THE CURRENCY RESET. IT IS DESIGNED BY THOSE THAT BENEFIT ON ALL SIDES OF THE EQUATION.
CAN THEY CONVINCE THE SHEEPLE TO PARTAKE IN SUBPRIME FULL ONCE AGAIN?
You can count on it. Where else will they be watching sports and bringing thier fast food value meals? House poor and in debt up to their eye balls. Every home a debtors prison?
Everybody needs a time sinkhole. Some people watch sports, others impotently complain about monetary policy on the Internet. Who's to say which one is more wasteful.
They'll push them during NFL/NBA games. That's the target demographic right there. People so stupid, that they proudly know more about their favorite teams and players than they do about their own families.
Aftre a few generations of education, them sheeps are already convinced.
Disclaimer; I'm short fleece. And, eat more lamb, 40,000 coyotes can't be wrong!
the banks got theirs. isn't about time we got ours?
Subprime is like trying to stop a giant boulder rolling down the side of a mountain, by having it roll through giant puddles of diarrhea and urine. You're still fucked, but now the boulder smells like San Francisco.
borrow, steal, finance, and leverage as much as you can, 2014-16 will be
the thieves stealing all they can as much and as fast as they can, in Washington.
"I deserve a free house ... it's only Fair ... and ...it's my Right as a Merikan!"
"I got Rights ya know."
This time its different!
"if you believe any of this, you have to be crazy after what we've been through."
I'm sure the banks don't believe it, but it doesnt matter. What they've "been through" was getting bailed out for their bad investments.
Banks have seen nothing but Moar and Moar, Bigger and Bigger bonuses ... bring in all on say the Banksters. 2008 was the best thing that could have happened to these leeches.
Rick needs to get his head around this --- the Fed is doing these crazy things because growth has stopped due to high priced oil.... they have no choice
HIGH PRICED OIL DESTROYS GROWTH
According to the results of a quantitative exercise carried out by the IEA in collaboration with the OECD Economics Department and with the assistance of the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. http://www.iea.org/textbase/npsum/high_oil04sum.pdf
Aggregate demand does not exist ex-ante. The demand is inferred "ex post" after the transaction has been concluded. You can distort credit which distorts the level of transactions above what they should be, but distortion in amount of transactions does not mean that the "demand" has been stimulated. In a transaction you do not have the good or service purchased separate from the credit money used on teh other side. Those are like conjoint twins, you can separate them only in your mind, but the reality is that you never see any item, good or services transacted without money or credit on the other side. Since interest rates reflect duration and time, you only shift deferred consumption to today´s consumption. You do not stimulate demand, you just time shift consumption levels.
WHEN THE TIME SHIFTING HAS REACHED ITS LIMIT: KABOOM!
See, at the end, I mean THE END, you DIE. Got it? So...your job while here is to help someone, starting with your family.
Then you send banksters nail guns with instructions.
CNBC is the Onion in deep state. That is all I can figure.
Turbo Tim said before congress: "MBS bonds are not treasury bonds, but we will make sure they are properly funded".
sounds like we have another 5 years of rising equities, houses and everythng else that can be paid for with borrowed money
Like the junkie going back to the fix he knows all too well. The only problem is that his veins in both arms are shot to hell and it takes a lot more pure stuff to get the same euphoria highs anymore.
Normally I take what Santelli yells about with a grain of salt because he a babbling TV personality but he is right on about what this is generally.
It is interesting to compare the housing markets in the US with that of the tropical country where I now reside. Because of the grotesque maldistribution of income in the US, instead of house prices falling in the recession, they are now rising due to the action of speculators. They are buying up empty houses and reselling or renting them out at pre-2008 prices. This continues to prevent marginal buyers from entering the market legitimately, encouraging the re-ignition of overreach and fraud that characterized the pre-2008 market. A house of similar size and quality in the tropics sells for much less than those in the US. There are several reasons for this: Real estate transactions here are not overloaded with the transaction costs that US transactions suffer. The lawyers, brokers, banks, insurance companies and government fees that parasitize transactions in the US are considerably less here. Also, the absence of space heating need reduces the cost of construction and maintenance. The banks here are accustomed to low credit quality borrowers and protect themselves by arranging direct salary deductions, which are legal and subject to little complaint. Mortgage defaults are common and the system is designed to handle them smoothly. In addition, the government directly subsidizes the mortgage interest rate on low income housing projects, and many families build their own houses on lots that they have purchased.