A very interesting article in the Wall Street Journal compares the potential fallout of the mortgage meltdown to the S&L debacle of the 1980’s and the tech bust of 2000.
I don’t agree with all the conclusions and presumptions, but one major point that is made (for better or worse) is that the suffering from the loan defaults has been (and will continue to be) at the hands of investors not banks, since most of the bad loans were sold in pools on Wall Street.
Still, we’ve seen Countrywide and more recently Citicorp sell off a nice chunk of assets recently to keep up with the defaults and lack of capital in their reserves. How will this all play out? Nobody knows for sure, but the Fed’s active role may soften things a bit with lower interest rates that stimulate more buying power for the consumer, thus reducing inventory for sellers and builders.
More to come…
