Dr. Housing Bubble 07/21/09

[Crewleader]

Spawning a Mortgage Disaster: The Birth of the Adjustable Rate Mortgage in 1982. California Confidential. A Budget Mess and Massive Cuts. S&P 500 Stock Market Speedway.

After looking at the Alt-A and option ARM disaster, many readers have been asking what in the world created the toxic ecology for these mortgages to spawn. You really have to go back to 1982 when the Garn-St. Germain Depository Institutions Act of 1982 was passed. This bill was sponsored by Congressman Fernand St. Germain, Democrat from Rhode Island and Senator Jake Garn, Republican from Utah. The bill passed with an overwhelming vote of 272-91 in the House. This one act played a large role in the S&L debacle but also laid the foundation for toxic adjustable rate mortgages. Title VIII specifically allowed for adjustable rate mortgages. Here is a part of the remarks from President Ronald Reagan at the time of signing the bill in 1982:

“(University of Texas) Now, this bill also represents the first step in our administration’s comprehensive program of financial deregulation. I particularly want to commend the leadership of the chairman, Senator Garn, and Chairman St Germain, along with Secretary Regan and his fine team at Treasury. They did a remarkable job forging a consensus within the Congress and among affected industries in favor of the bill’s deregulatory provisions. I’d like to also thank Congressmen Stanton, Wylie, and LaFalce for their assistance.

What this legislation does is expand the powers of thrift institutions by permitting the industry to make commercial loans and increase their consumer lending. It reduces their exposure to changes in the housing market and in interest rate levels. This in turn will make the thrift industry a stronger, more effective force in financing housing for millions of Americans in the years to come.”

http://www.doctorhousingbubble.com/spawning-a-mortgage-disaster-the-birth-of-the-adjustable-rate-mortgage-in-1982-california-confidential-a-budget-mess-and-massive-cuts-sp-500-stock-market-speedway/

[The_Casual_Observer]

1. A little while later there was a little something called "the savings & loan collapse"

However, by then ronnie's pea brain was so atrophied that he would have never noticed it, not that he would have understood it anyway.

[4dsc]

2. P/E ratio for the S&P 500 was 134 last month..

Did you read further down the article where this was stated "P/E ratio for the S&P 500 was 134".. WT heck is going on here..

[Hawkowl]

3. Pump & Dump by the....

FED! The Fed as been printing money at an astronomical pace. Since, obviously, the banks haven't been loaning it out to consumers or businesses, all that money has to go somewhere. The where appears to be a redux of the stock market and commodity bubbles.

This does not appear to be the makings of a happy ending.