Wall Street inflated the housing bubble, but quietly "walks away" as it bursts.........

[marmar]

NEW YORK (MarketWatch) -- What happens when you have 20 years of price appreciation in the housing market in just five years?

Your house goes from personal piggy bank to the pigs at the bank.

That's the unsavory reality lawmakers and a panel of experts will grapple with Tuesday in a Washington summit to discuss the future of Fannie Mae and Freddie Mac, the government-sponsored mortgage lending giants.

Though bond guru Bill Gross, co-founder of mortgage-backed securities Lewis Ranieri, and bank executives may be asked about the role of government in the mortgage market, it's the bubble that's still the problem, even with the steep price declines and foreclosures of the last two years.

It's also why Wall Street, having been burned by housing, isn't interested in financing the market. Nine out of every 10 mortgages are backed by Fannie and Freddie. Private money has exited.

Wall Street and banks aren't willing to take the risk of further declines. They'd rather leave that to taxpayers who have no choice. Moreover, private investors are effectively priced out of the sale of mortgage assets since the government isn't paying the risk premium private investors would demand.

A bursting bubble

Adjusted for inflation, the price of the median U.S. home was about $125,000 in 1970 and rose to about $150,000 in 1999. In other words, over 29 years, the price of the median U.S. home rose about 2%, according to date from the National Association of Realtors. ............(more)

The complete piece is at: http://www.marketwatch.com/story/wall-streets-smart-bet-against-home-ownership-2010-08-17

[customerserviceguy]

1. This is one thing I can't fault Wall Street for

It was individual greed that caused people to pay way too damned much for houses that they thought they'd make a fat profit off of. Wall Street's greed has done enough damage to our economy, but the housing bubble is not primarily it's fault.

[marmar]

2. Yeah, they had no culpability in writing dense loan terms that only a lawyer could figure out.....

Right?

[customerserviceguy]

3. While mortgage loans are gobbledegook squared

they're written by banksters, not by stock brokers. Besides, it's usually plain enough to see how much you're borrowing, and at what interest rate, if you're really paying any attention at all.

However, if you're thinking, "House payment is only $2000 a month (for now) and the house will appreciate $3000 a month, how can I lose??!!" you're setting yourself up for certain failure.

[Hannah Bell]

7. bullshit.

[customerserviceguy]

8. Care to elaborate as to why Wall Street brokers are more responsible

than bankers on every Main Street in America, as well as greedy realtwhores and "Flip That House"-sated amateur speculators?

There's plenty to blame Wall Street for, possibly even more stuff than you can hang on the banksters, but the housing bubble was not their creation. A relative handful of them merely sought ways to hand the risk off from incautious banks to investors who just didn't look before they leapt when buying the fairy-dust 'securities' that were created.

[snot]

4. Hold it: 125k to 150k sounds more like 20%, not 2%.

[marmar]

5. Maybe it's an adjusted-for-inflation figure.

[snot]

6. It said it's inflation adjusted, which only makes it weirder. I think it's a typo.