ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Subprime Home Mortgage Crisis

Updated on September 16, 2011

1-4 State Street Sued Over Pension Losses Tied to Subprime Mortgage Investments

"We forgot there was a lot more risk in the strategy," said one State Street executive."

The State Street Corporation which manages $2 trillion for pension funds and insurance companies fired a senior executive and set aside $618 million to cover legal claims stemming from investments in subprime mortgage securities. Five State Street clients have sued claiming they have lost tens of millions of dollars in State Street funds that they wer told would be largely invested in risk-free debt like Treasuries. One fund loas 28 percent of its value after placing on mortgage-related securities.

Subprime mortgage ramifications extend well beyond the United States. Last month a town in Australia sued a unit of Lehman Brothers for selling it mortgage-backed securities that lost 84 percent of their value.

Here's a link to an article in today's NYTimes by Vikas Bajaj.

Another Shoe of Many Drops in Florida as Public Investment Pool Shut Down

The New York Times reported this morning 1-1-08 that a statewide investment pool for public funds in Florida has shut down due to investments in vehicles tied to subprime mortgages. This creates serious problems for cities and other governmental units which are counting on revenues from the now-frozen state investment pool.

I wonder how many other public pension and other funds are also affected by plummeting subprime mortgage-related investments???

Master Liquidity Enhancement Conduit Dead Aborning

CitiGroup, Bank of America and JPMorgan Chase apperared to have backed out of Treasury Secretary Henry Paulson's proposed "Master Liquidity Enhancement Conduit (M-LEC)" which was to provide a fund of up to $80 billion to stabilize the subprime mortgage structured investment vehicle (SIV) market. The banks' backing away from their commitment to the M-LEC should not be surprising. The fact that they simply don't have the billions for the proposed fund is indicated by the fact that they have been turning to "sovereign funds" in China, the Emirates and Singapore to keep themselves afloat. Paulson's plan, although well-intentioned, thus had about as much a chance for success as the legendary "sky hook." Eric Dash's article from the NYT 12-22 is linked below.

"After the Money's Gone" 0p-ed by Paul Krugman is Disquieting 12-14

Paul Krugman's op-ed on the subprime home mortgage credit crisis is worrisome because it leaves a strong impression that there may be plenty of bad news yet to come. He points out the difference between the 1998 crisis caused by bad bets which led to the collapse of the huge hedge fund Long Term Capital Management and the current credit crisis.

In the case of Long Term Capital Management not all that much money had been lost; a temporary expansion of credit by the Fed gave everyone time to regain their nerve, and the crisis soon passed.

In August of this year, the Fed tried again to do what it did in 1998, and at first it seemed to work. But then the crisis of confidence came back, worse than ever. The reason is that the financial system--banks and non-bank financial institutions--made a lot of loans that are likely to go very, very bad...

As home prices come back down to earth from the housing bubble many borrowers will find themselves with negative equity--owing more than thrir houses are worth...

And the numbers are huge. The financial blog Calculated Risk, using data from First American CoreLogic, estimates that if home prices fall 20 percent there will be 13.7 homeowners with negative equity. If prices fall 30 percent, that number would rise to more than 20 million.

That translated into a lot of losses, and explains why liquidity has dried up. What's going on in the markets isn't an irrational panic. It's a wholly rational panic, beause there's a lot of bad debt out there, and you don't know how much of that bad debt is held by the guy who wants to borrow your money.

How will it end? Markets won't start functioning normally until investors are sure taht they know where the bodies--I mean, the bad debts--are buried. And that probably won't happen until house prices have finished falling and financial institutions have come clean about all their losses. All of this will probably take years.

Meanwhile, anyone who expects the Fed or anyone else to come up with a plan that makes this financial crisis just go away will be disappointed.

Paulson Plan Designed to Benefit Investors Not Foreclosed Homeowners

op-Ed Columnist

Henry Paulson's Priorities

By PAUL KRUGMAN Published: December 10, 2007

By Bush administration standards, Henry Paulson, the Treasury secretary, is a good guy. He isn't conspicuously incompetent; and he isn't trying to mislead us into war, justify torture or protect corrupt contractors.

Mr. Paulson's actions reflect the priorities of the administration he serves. And that, ultimately, is what's wrong with the mortgage relief plan he unveiled last week.

The plan is, as a Times editorial put it yesterday, "too little, too late and too voluntary." But from the administration's point of view these failings aren't bugs, they're features.

In fact, there's a growing consensus among financial observers that the Paulson plan isn't mainly intended to achieve real results. The point is, instead, to create the appearance of action, thereby undercutting political support for actual attempts to help families in trouble.

In particular, the Paulson plan is probably an attempt to take the wind out of Barney Frank's sails. Mr. Frank, the Democratic chairman of the House Financial Services Committee, has sponsored legislation that would give judges in bankruptcy cases the ability to rewrite mortgage loan terms. But "Bankers Hope Bush Subprime Plan Will Scuttle House Bill," as a headline in CongressDaily put it.

As Elizabeth Warren, the Harvard bankruptcy expert, puts it, "The administration's subprime mortgage plan is the bank lobby's dream." Given the Bush record, that should come as no surprise.

There are, in fact, three distinct concerns associated with the rising tide of foreclosures in America.

One is financial stability: as banks and other institutions take huge losses on their mortgage-related investments, the financial system as a whole is getting wobbly.

Another is human suffering: hundreds of thousands, and probably millions, of American families will lose their homes.

Finally, there's injustice: the subprime boom involved predatory lending - high-interest loans foisted on borrowers who qualified for lower rates - on an epic scale. The Wall Street Journal found that more than 55 percent of subprime loans made at the height of the housing bubble "went to people with credit scores high enough to often qualify for conventional loans with far better terms."

And in a declining housing market, these victims are stuck, unable to refinance.

So there are three problems. But Mr. Paulson's plan - or, to use its official name, the Hope Now Alliance plan - is entirely focused on reducing investor losses. Any minor relief it might provide to troubled borrowers is clearly incidental. And it is does nothing for the victims of predatory lending.

The plan sets voluntary guidelines under which some, but only some, borrowers whose mortgage payments are set to rise may get temporary relief.

This is supposed to help investors, because foreclosing on a house is expensive: there are big legal fees, and the house normally sells for less than the value of the mortgage. "Foreclosure is to no one's benefit," said Mr. Paulson in a White House interactive forum. "I've heard estimates that mortgage investors lose 40 to 50 percent on their investment if it goes into foreclosure."

But won't the borrowers gain, too? Not if the planners can help it. Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house's value - which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.

And what about people with good credit who were misled into bad mortgage deals, who should have been steered to loans with better terms? They get nothing: the Paulson plan specifically excludes borrowers with good credit scores. In fact, the plan actually provides an incentive for some people to miss debt payments, because that would make them look like bad credit risks and eligible for relief.

Now, Mr. Paulson's attempt to help investors, while doing little or nothing for distressed and defrauded borrowers, might make sense if his plan would reduce investor losses enough to seriously improve the overall financial situation.

But only a small fraction of subprime borrowers will qualify for relief, and many of these borrowers will eventually face foreclosure anyway. So the plan is unlikely to reduce overall mortgage-related losses by more than a few percent, at most - not enough to make any real difference to financial stability. Indeed, interest-rate spreads that have been signaling a crisis of confidence in the financial system didn't narrow at all when the plan was announced.

Still, you might say that the Paulson plan is better than nothing. But the relevant alternative isn't nothing; it's a plan that - like Barney Frank's proposal - would actually help working families. And that's what the administration is trying to avoid.

Next Article in Opinion (7 of 22) ยป


Liquidity Conduit May be Reduced to a Trickle

CitiGroup and other big banks may reduce their committment to the Master Liquidity Enhancement Conduit according to a report by Eric Dash in the NYT 12-10-07.

Vanguard Money Funds and Bond Funds Not Involved in Subprime Investments 11-25-07

In case anybody wondered, as I did, whether Vanguard's money market fund has been affected by the subprime mortgage liquidity crisis, the answer is NO. Here 's what the Vanguard Chairman's Letter which I received a couple of days ago had to say, in part:

"The funds enjoy two interwoven competitive advantages: lower costs and high credit standards. Because the funds carry very low expense ratios, their managers don't need to reach as far along the risk spectrum to seek to generate competitive yields. That was an advantage during the past 12 months, when markets became more volatile in reaction to increasing defaults on sub-prime mortgages...

"This year was far from uneventful....During the spring and summer of 2007, subprime mortgage loans increasingly fell into default, triggering downgrades of investment securities backed by pools of these loans. MANY MONEY MARKET FUNDS HAD INVESTED IN (AND CONTINUE TO INVEST IN) THESE POOLS, WHICH CAN BOOST FUND YIELDS BUT CAN CREATE LIQUIDITY PROBLEMS SHOULD THE SECURITIES BE DOWNGRADED AS MANY HAVE BEEN.

"VANGUARD'S MONEY MARKET FUNDS DON'T INVEST IN THESE SECURITIES. Our fund managers are focused first and foremost on liquidity and credit quality, and the SUBPRIME MORTGAGE SECURITIES NEVER PASSED THESE TESTS.


Vanguard Peer.......... Group Avg.

Money Market Fund

Investor shares............................ 0.24 % ...................0.91%

Institutional shares...................... 0.08........................ 0.44

"If you hold shares of a mutual fund whose expense ratio is one-half the average for its peer group, it stands to reason that you'll keep a greater portion of the return on your investment. A competing agrument from some quarters is: 'You get what you pay for.' In the money market world, however, years of empirical evidence have shown no benefit to paying a higher price. Money market managers are fishing in the same shallow pond of short-term debt. A fund with higher costs must by definition take on more risk to cover those costs and produce a high-enough return to attract investors...

"Vanguard's lower expense ratio means its managers can seek to produce a competitive return without reaching for lower-quality securitits and the higher yields they offer. Money market funds are meant to be safe, liquid investments. That's why our managers focus on these two attributes when selefting securities for our portfolios. The summer's market turmoil was a good reminder of the importance of careful credit selection.

John J. Brennan

Chairman and Chief Executive Officer

[COMMENT: Major banks and institutions are not likely to allow their money funds to fall below their $1 par value because that would damage their reputation and harm their other lines of financial business. However, even though the major baniks shore up their money market funds to make up for subprime losses, yields may suffer. Other sponsors of money market funds may be unable or unwilling to put up the money required to maintain the $1 par value of their funds. They are not legally required to do so.]

Another Subprime Casualty--Freddie Mac 11-20


from The Wall Street Journal

Freddie Mac's net loss for the third quarter more than doubled to $2.03 billion on higher credit-loss provisions and the marking to market of securities, reflecting housing-market weakness and the deterioration of mortgage credit. The home-loan investor said the fair market value of its net assets fell by $8.1 billion in the quarter. Freddie Mac has hired an adviser to study capital-raising options and said it is considering cutting its dividend by half. The shares fell 6% in premarket trading.

Swiss Reinsurance Takes $1.1 Billion Hit as Subprime Fiasco Spreads to the Insurance Industry, Julia Werdigier in the NYTimes 11-20

London 11-19--Swiss Reinsurance, the world's biggest reinsurer, said Monday that it had taken a $1.07 billion write-down on the value of some derivatives backed by mortgage securities.

The announcement unsettled investors, coming two weeks after the company said its exposure to problems in the American subprime mortgage market would be limited. [Well, what's a billion or two here or there!]

The announcement will heighten the perception of risk in the insurance industry for some time when we thought the risk management of the insurance sector was getting better according to Roger Ferguson manager of Swiss Re's financial services division and a former governor of the U.S. Federal reserve. "Today's announcement is a serious blow to confidence."


from The Wall Street Journal

Freddie Mac's net loss for the third quarter more than doubled to $2.03 billion on higher credit-loss provisions and the marking to market of securities, reflecting housing-market weakness and the deterioration of mortgage credit. The home-loan investor said the fair market value of its net assets fell by $8.1 billion in the quarter. Freddie Mac has hired an adviser to study capital-raising options and said it is considering cutting its dividend by half. The shares fell 6% in premarket trading.

Public School Funds Hit by SIV Debts Hidden in Investment Pools November 16 Bloomberg Report

Bloomberg reports November 16 that the SIV/CDO subprime fiasco is spreading to various state public investment funds. This report indicates that the subprime scandal is only beginning to play itself out. We are in store for more bad news as the far-reaching effects of the subprime credit abuses spread to investments of public pension, school and other investment funds.

Here are some excerpts from a November 16 Bloomberg article by David Evans:

"Hal Wilson smiles at the blue numbers on his desktop screen. His money is yielding 5.77 percent. For the chief financial officer of Florida's Jefferson County school board, that means the $2.7 million of taxpayer funds he's placed in the state's Local Government Investment Pool than it would get in a money market fund...

"'We don't have the time or staff for professional money management. They have lots of investment advisers. IT'S RISK FREE AND EASY.'


"These include so-called structured investment vehicles, or SIVs, which are among the subprime mortgage debt-filled contrivances that have blown up at the biggest banks in the world....

"State pool losses may hit taxpayers in places like Jefferson County in the form of reduced services or higher taxes.


"Thousands of school, fire, water and other local districts across the U.S. keep their cash in stant- and county-run pools. These public accounts, modeled after private money market funds, are supposed to invest in safe, liquid, short-term debt such as certificates of deposit.

"All told there about 100 such pools, containing MORE THAN $200 BILLION at the end of 2006, according to Westborough Massachusetts-based iMoneyNet, a research firm that tracks these funds.

"Public fund managers say they've bought SIV debt because it had the safest credit ratings and offered higher yields than other short term fixed income investments.

SIVs, many of which are assembled by London bankers, had a low profile until some of them collapsed. The $7 billion Cheyne Finance SIV, incorporated in Delaware, defaulted on October 17."

It sounds to me as if we are in store for plenty more bad news as all the ramifications of the subprime mortgage scandal are revealed.

Money Market Funds Affected by Subprime Investments

Another shoe dropped in the unfolding subprime scandal as Eric Dash reported in today's NYTimes (11/14) that the the big banks are taking additional hits to prop up their money market funds that had been chasing yields by investing in SIVs involved in the subprime mortgage market.

The banks' support moves have cost the firms hundreds of millions of dollars and could cost more if credit markets deteriorate further.

The money market fund bailouts reflect the fact that while the managers of money funds have no legal obligation to assure the funds don't lose money, they fear that losses might lead investors to flee the fund and perhaps take money out of other funds managed by the banks or fund companies.

Bank of America said yesterday it would provfide as much as $600 million to prop up several Columbia Management funds which bought large amounts of debt issued by SIVs

Credit Suisse said it booked $125 million in unrealized losses after it bought notes issued by collateralized debt obligations and SIVs.

Wachovia Corporation, Legg Mason, SEI Investments, Sun Trust Banks have each secured letters of credit suggesting they may be willing to lose money before investors in their money funds do.

Peter Crane, of Crane Data which tracks the fund industry said "You could see this even rivals 1994 when roughly 50 money funds required bailouts. In that year, rapidly rising interest rates damaged funds tht had bet such interest rate increases would not occur. And again the axiom that higher risk accompanies higher returns proved to be true when the funds invested in short term securities like asset-backed commercial paper that were highly rated by the bond rating agencies [Sound familiar?] but which offered greater yields than other assets.

So far, analysts say that most SIV securities are trading at 97 to 98 cents on the dollar. But if credit conditions worsen, and more SIVs are forced to unwind, the resulting fire sale would put pressure on prices [and increase the cost of money fund bailouts to their sponsors].

At a Merrill Lynch conference, the bank's CFO, Joe Price said that it would provide $300 million in support to an institutional cash fund and anticipated providing a comparable amount to a group of Columbia management retail funds. [Another $600 million down the drain!]

Earlier this week SEI Investments, a money manager near Philadelphia, said that it planned to shield two funds from losses from debt issued by Cheyne Financial, a SIV that was forced to liquidate. The company said it would step in to assure that one fund's net asset value did not fall below 99.5 cents a share, the minimum price that can be rounded to $1. That indicated it might allow the fund to take some losses, which would show up as a lower yield, rather than as a decline in the price of the fund's shares.

[I wonder how many fund sponsors there are out there who may be unable or unwilling to pony up the money required to keep the value of their money frunds at $1????]

A Safe Haven Becomes a Concern by Eric Dash NYT November 14, 2007

Master Liquidity Enhancement Conduit

NY Times ace financial guru, Floyd Norris, in his column today, Oct 19, 2007, explains Treasury Secretary Henry Paulson's latest invention to ward off disaster for the big banks and the country's financial system, the "Master Liquidity Enhancement Conduit," which will rival the Los Angeles Aqueduct. Here's a link to Norris's column

Some Wonder if Banks' Stabilization Fund Will Work by Eric Dash, NYT 11/12/07

"It is quickly being realized that it doesn't really solve the problems," said Joshua Rosner of Graham Fisher and Company. "The pain they have taken of skimming the cream from the top doesn't resolve the fact there is poison at the bottom."

The three banks have committed to put up only around $5 billion to $10 billion each, leaving the remaining portion of the $75 billion to be funded by other financial institutions. The 30 or so remaining SIVs have about $250 billion in assets they need to unload in the coming months. This suggests the backup fund will not be a meaningful purchaser of last resort, even if it wanted to.

By encouraging SIV note holders to extend their notes by assuring them of a ready buyer, the backup fund could buy SIVs a few months of extra time.

The backup fund will not purchase the most distressed assets in the SIVs. Bank organizers agreed that it would not accept any subprime mortgage-related assets and only certain types of risky complex instruments like collateralized debt obligations..

This means that the SIVs or the banks that sponsor them, will be left holding their most battered securities or worse--that they may be forced to sell them at fire-sale prices.

"Will this resolve the basic issue of the assets of the SIV trading below what they were originally?" asked Steven Abrahams, the chief interest-rate strategist at Bear Stearns. "No, it defers the day of reckoning."

"If the people who organized this are right and the market gets better six months from now, they will look like geniuses," he added. "If they are wrong, six months from now the problem will just re-emerge.

Master Liquidity Conduit Agreement

11-11-07 The nation's three biggest banks, Citigroup, Bank of America and JPMorgan-Chase have agreed on the terms of their $75 billion credit backup fund designed to shore up their cratering subprime mortgage funds.

The Sage of Omaha

Mortgage Security Bondholders Facing a Cutoff of Interest Payments

In this morning's NYTimes, Vikas Bajaj reports more bad news which is likely to be reflected in today's markets--Investors who hold bonds backed by risky home loans have continuted to receive their monthly interest payments--UNTIL NOW.

Collateralized debt obligations--made up of bonds backed by thousands of subprime home loans--are starting to shut off cash payments to investors in lower-rated byonds as credit-rating agencies downgrade the securities they own. Read the entire article here:

Banks' Plan for Relief May Itself Need Help by Gretchen Morgenson and Eric Dash

Eric Dash and Gretchen Morgenson report in this morning's NYTimes (10-19-07) that CitiGroup's, Bank of America's, and JP Morgan Chases's "Master Liquidity Enhancement Conduit" may itself need help.

The proposal provides a framework for a new fund to purchase assets held by structured investment vehicles, or SIVs, that have been under pressure since the credit market meltdown this summer.

It is intended to help the banks backing such vehicles to avoid bringing those risky loans onto their balance sheets and to spart investors--INCLUDING MONEY MARKET FUNDS--distress...But the plan has been plagued by uncertainties. All three banks agree on the concept but have different ideas on the details....CitiGroup, which operates the four largest SIVs and could be on the hook for $100 billion, has a clear interest..If the fund was able to buy those assets, CitiGroup would minimize the impact on its balance sheet. Some suggest that the plan is a CitiGroup bailout--something the bank denies.


Bank of America and JPMorgan Chase, on the other hand, do not operate SIVs BUT THEY DO RUN LARGE MONEY MARKET FUNDS THAT INVEST IN THEM. Even if their funds were never in jeopardy, any news that could rattle the overall money markets might worry their investors....

William H. Gross, investment chief of PIMCO ($700 billion in bond funds) says "This is just taking money from one pocket and putting it in another, with admittedly slightly stronger credit backing..." Gross said the effort reminded him of the Japanese banks that refused to sell or write off troubled loans at distressed prices in the1990s.

Words of Wisdom from Warren Buffett

"Not only can you not turn a toad into a prince by kissing it, but you also cannot turn a toad into a prince by repackaging it"

Warren Buffett

Professor Krugman Grades Alan Greenspan's Paper

Op-Ed Columnist

Gone Baby Gone

By PAUL KRUGMAN Published: October 22, 2007

It pains me to say this, but this time Alan Greenspan is right about housing.

Mr. Greenspan was wrong in 2004, when he sang the praises of adjustable-rate mortgages. He was wrong in 2005, when he dismissed the idea that there was a national housing bubble, suggesting that at most there was some "froth" in the market. He was wrong last fall, when he suggested that the worst of the housing slump was behind us. (Housing starts have fallen 30 percent since then.)

But his latest pronouncement - that the market rescue plan being pushed by Henry Paulson, the Treasury secretary, is likely to make things worse rather than better - looks all too accurate.

To understand why, we need to talk about the nature of the mess.

First of all, as I could have told you - actually, I did - there was indeed a huge national housing bubble.

What even those of us who realized that there was a bubble didn't appreciate, however, was how much of a threat the bursting of that bubble would pose to financial markets.

Today, when a bank makes a home loan, it doesn't hold on to it. Instead, it quickly sells the mortgage off to financial engineers, who chop up, repackage and resell home loans pretty much the way supermarkets chop up, repackage and resell meat.

It's a business model that depends on trust. You don't know anything about the cows that contributed body parts to your package of ground beef, so you have to trust the supermarket when it assures you that the beef is U.S.D.A. prime. You don't know anything about the subprime mortgage loans that were sliced, diced and pureed to produce that mortgage-backed security, so you have to trust the seller - and the rating agency - when they assure you that it's a AAA investment.

But in the case of housing-related investments, investors' trust was betrayed. Supposedly safe investments suddenly turned into junk bonds when the housing bubble burst. High profits reported by hedge funds - profits that were reflected in huge payments to the fund managers - turn out to have been based on wishful thinking.

Thus, when two hedge funds run by Ralph Cioffi of Bear Stearns imploded last summer, it came as a huge shock to many investors, and helped trigger a market panic. But a recent BusinessWeek report shows that the funds were a disaster waiting to happen. The funds borrowed huge amounts, and invested the proceeds in questionable mortgage-backed securities.

Even worse, "more than 60 percent of their net worth was tied up in exotic securities whose reported value was estimated by Cioffi's own team." We're profitable because we say we are - just trust us. That hasn't ever caused problems, has it?

Stories like this have led to a crisis of confidence. The current yield on one-month U.S. government bills is only 3.41 percent, an amazingly low number, and a sign that people are parking their money in government debt because they don't trust private borrowers. And the result is a shortage of liquidity - the ability to raise cash - that is greatly damaging the economy.

Which brings us to the rescue plan proposed by a group of large banks, with Mr. Paulson's backing.

Right now the bleeding edge of the crisis in confidence involves worries that there may be large losses hidden inside so-called "structured investment vehicles" - basically hedge funds that borrow from the public and invest the proceeds in mortgage-backed securities. The new plan would create a "super-fund," the Master Liquidity Enhancement Conduit, which would seek to restore confidence by, um, borrowing from the public and investing the proceeds in mortgage-backed securities.

The plan, in other words, looks like an attempt to solve the problem with smoke and mirrors.

That might work if there were no good reason for investors to be worried. But in this case, investors have very good reasons to worry: the bursting of the housing bubble means that someone, somewhere, has to accept several trillion dollars in losses. A significant part of these losses will fall on mortgage-backed securities. And given this reality, the "conduit" looks like a really bad idea.

I'd put it like this: Investors aren't putting their money to work because they don't know where the bad debts are. And when investors need clarity, the last thing you want to be doing is pumping out more smoke.

Mr. Greenspan's take, expressed in an interview with the magazine Emerging Markets, seems broadly similar. "If you believe some form of artificial non-market force is propping up the market," he said, "you don't believe the market price has exhausted itself."

Translated: this rescue scheme could be seen as an attempt to hide the bad debts everyone knows are out there, and as a result could delay any return of trust to the markets.

Alan Greenspan is making sense.

Wall Street Journal Reports SIVs Pose Risk for Money Market Funds

The October 19 Wall Street Journal reported that SIVs pose risks for money market funds. Here's a link to the article:

Debt Trap


    0 of 8192 characters used
    Post Comment

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      7 years ago from Birmingham, Michigan

      Thanks for your comment. We still have a long way before we're out of the woods.

    • molometer profile image


      7 years ago from United Kingdom

      Hi Ralph, just read this story and realised that it's over 3 years old and we are still reeling from this chaos and it's only getting worse. It seems to me that no-one in government on either side of the pond or in Europe generally have any clue what to do as everything they do makes things worse. 28th September 2011 we had Ed Balls UK M.P. on TV demanding that someone somewhere should come up with a plan "any plan as long as it was a plan" These people are "leading" us? No wonder we are in trouble and the way things are looking it is set to get 100 times worse with the euro-zone imploding as it is with the twin basket cases of Greece and Italy not to mention Eire'. Great hub as relevant today as when you wrote it.

    • Toronto12 profile image


      8 years ago from Toronto

      Option adjustable mortgages are starting to peak in resets now - earlier than expected because of the negative amortization clauses.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      10 years ago from Birmingham, Michigan

      Thanks for the comment. Glad you enjoyed the video. [I posted this Hub more than a year ago.]

    • profile image


      10 years ago

      I love the debt video. I'm going to show that to everybody!

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      10 years ago from Birmingham, Michigan

      Thanks. I'll check it out. Gramm is a disaster for McCain. Did you see where Gramm invested in a soft core porn movie called "Truck Stop Women" or something like that?

    • Lynn Byrne profile image

      Lynn Byrne 

      10 years ago from Daytona Beach Florida

      For a great story on how we got to this mortgage mess, go to and check out the timeline they published. Also, check out the story on former Senator Phil Gramm, who lead the effort to reduce the regulation that allowed this mess to happen.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      10 years ago from Birmingham, Michigan

      True. There's plenty of blame to go around. Things have continued to un-ravel since I published this hub a couple of months ago. And we haven't heard all the bad news yet, in my opinion.

      Thanks for your comment.

    • profile image


      10 years ago

      Subprime loans have become worrisome, because it leaves a strong impression of bad bets which led to the collapse of the huge hedge fund Long Term Capital Management and the current credit crisis

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      I hope so, but I think that there's more bad news yet to come--more home mortgage foreclosures and more problems for the banks and pension funds and other investors who bought the toxic mortgage backed securities.

      Happy New Year!

    • thisayakorn profile image


      11 years ago from Bangkok

      It's New Year now. Things should turn better.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      Soon there may be an opportunity to buy equity index funds at a bargain price.

    • barranca profile image


      11 years ago

      buy gold.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      This may be why the Dow Industrials went down 366 points today.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)