It Wasn't a Mortgage Recession After All: So Why Don't We Feel Better?

[madmom]

The Great Recession wasn't the result of subprime mortgage madness, according to a new report from the National Bureau of Economic Research. It was just a plain old bank panic. Yeah, but weren't bank panics supposed to be a thing of the past, thanks to the creation of the Federal Deposit Insurance Corporation in 1934?

That's the problem.

The report, by Yale economics professor Gary Gorton, says subprime mortgage securitization was a mess -- a house of cards probably doomed to fall -- but subprime by itself simply wasn't big enough to put the entire financial system at risk. That required a failure of the Renew Sale and Repurchase (REPO) market for collateralized securities that over the last 30 years had come to backstop global finance.

The problem here, of course is that hardly anyone has even heard of REPO, which manages to be an unregulated, uninsured $20 trillion business that is absolutely essential to keeping money flowing in the world. Subprime is only $1.2 trillion -- not big enough by itself to wag this dog.

According to Gorton, the entire basis of global banking changed in the 1980s, thanks to money market funds and junk bonds, which took all the profit out of being a traditional bank. So banks began securitizing loans to regain those lost profits.

http://www.housingwatch.com/2010/02/26/it-wasnt-a-mortgage-recession-after-all-so-why-dont-we-feel-b/?icid=main|aim|dl1|link3|http%3A%2F%2Fwww.housingwatch.com%2F2010%2F02%2F26%2Fit-wasnt-a-mortgage-recession-after-all-so-why-dont-we-feel-b%2F

[Taverner]

1. Oh shit

This is not good news.

This mean the last shoe has not dropped yet.

Could be it never drops

Or could be it will drop, and give us another lost year or two

[BrklynLiberal]

2. ..and the demise of the Glass-Steagall Act was not a factor.....riiiiiiiiiiiiiiiiight.

I live right near this gorgeous bridge that I happen to own, and can sell to you very reasonably.

[Juneboarder]

3. The deck of cards

continues to be propped up, even by the Obama administration. Washington needs to stop propping up this madness and allow for correction. It's the only way we're going to find the light at the end of the tunnel...

[okieinpain]

5. man I would hate to see that happen. couldn't you request

something a little less harsh. but the silver lining in this is it puts a stop to the the poor blacks caused the recession.

[Juneboarder]

6. I didn't know race was ever a issue of blame in this mess...

But what we need now is something harsh to bring us back into reality. There's too many people that refuse to open their eyes...

[okieinpain]

7. oh yeah rush, beck and a couple of the others made their usual

hints. I'll try to find some post for them.

[okieinpain]

8. here's one story, I'll try to find a couple more.

http://kathmanduk2.wordpress.com/2009/03/12/minority-meltdown-minorities-blamed-for-subprime-mortgage-crisis/

[Juneboarder]

10. After reading these two links

it does bring back memories... bad memories. That's horrible. It's just the government pointing fingers at anyone but themselves...

[okieinpain]

9. one more.

http://crooksandliars.com/john-amato/rush-limbaugh-says-blacks-are-angry-and

[midnight]

4. I suppose a few more articles on repo might help me understand....