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Notes to myself, possibly of interest to others.
-- Bill Northlich

Monday, August 23, 2010

Securitization - the key to all

I've been harping about the dead securitization market for a loooong time.  First here; latest here.  Many in-between.  But, it keeps surfacing.   And, imo, it's important.  No one seems to -get- that 
  1. Banks don't lend, they originate and sell, and
  2. Since the only buyers of home loans is/are the GSE's (Fannie, etc), the housing market is dead, but for the government.
  3. So, this recession or depression, or whatever, is really serious.  Life as we know it is gone, but for some government support which is probably unsustainable
So.  Here is Rosenberg today:  "...what we still have on our hands is a broken financial system. We hope this is not lost on the perma-bulls among us, but the pool of credit under the umbrella of private label asset-backed consumer and mortgage asset loans has collapsed by over $5 trillion, or by 60% (!), over the past two years. The private market for securitized credit is back to where it was in 2000 when the economy was two-thirds the size it is today. What few people realize is that 100% of the increase in GDP during that wonderful, though obviously artificial, economic recovery coming out of the tech wreck from 2002 to 2007 was funded by the explosion in the securitized credit market. This market is now, for all intents and purposes, defunct and replaced by Uncle Sam’s family (Fannie, Freddie, Sallie ... and the FHA too)."

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