Bending the Third Rail
Because We Should, We Can, We Do
Friday, February 09, 2007
Sub-Prime Meltdown
As most of you know, the recent bubble in the housing market was created in part by cheap money and eased lending practices. One of the consequences of the unraveling of a housing bubble can be when the chickens come home to rooast. As variable interest rates climb, many borrowers (who thought rates would stay low forever) are having serious problems and defaults are on the rise. Yesterday saw headline news on this when one subprime lender announced problems with their loan portfolio. The stocks in a number of lenders responded accordingly:

That's quite a haircut. Analyst opinions on the issue range from "one lenders problems are not all lenders problems" to "if rates go much higher, we may see a meltdown". The stock market in general continues to behave as if there is zero risk in the world (likely another bubble), so who knows what will happen, particularly in the long run .....
Blogger Lynne said...
"many borrowers (who thought rates would stay low forever)"

That's because they are stupid. Had they paid attention to the world around them they would have been forwarned. No sympathy here.