Stirring the Pot

Many financial professionals have made it very clear to the government that the housing sector, including all the "easy credit" lenders of those toxic mortgages, is in BIG trouble.

The most amazing part of this sad tale is that no one can reasonably account for how big the final problem will be because all of those "junk" exotic mortgages were packed together and sold ALL AROUND THE GLOBE. (Mortgages are often bought and sold just like stocks in what's called a secondary market.) Now, all of these "slices" of mortgage packages are beginning to spoil and the buyers have no recourse because no one is precisely certain who sold what to whom -- and to whom they should go to get their money back.

What a mess!

It's sort of like a beef stew made by a town. Everyone contributes some beef, celery, onions, potatoes and peas. All of the ingredients are put together in a pot. When the stew is served it's impossible to pick out one person's donated ingredients. The stew can't be unmade to identify whose beef is in your bowl; nor can these mortgage obligations be unmade to sort out the weakest links.

Enter Wall Street, which is begging the Fed to save it from the mess it has made, knowing full well that even more junk mortgages will adjust or reset to higher rates and payments next year than this year. So, the Fed lowered rates more than most professionals expected.

Now, the Washington "spin doctors" go to work in earnest.

Secretary of the Treasury Paulson has already gone on record during a CNBC interview as saying that the administration is "really focused on the homeowners who are in danger of losing their home."

BULL ****!!

Neither the administration nor the Democrats can afford to wait around for more mortgage companies and maybe a large bank or two to go belly up when the next round of upward adjustments hits like a ton of bricks.

It is also hoped that, by lowering the short-term interest rates and the ensuing lowering of the prime rate by banks, more homeowners will be able to make their monthly payments when their mortgages reset higher. It didn't take long for that to be shot down. Interest rates are now HIGHER on the 10-year Treasury, which is used to set mortgage rates.

Since there appears to be a serious lack of real world, no smoke and mirrors insight for our representatives in our nation's capital and the Fed, let me offer some: You WON'T be able to save those individuals who bought homes that they couldn't afford with money that they didn't have in the first place! Lower rates will not make it any easier for them to have a second chance to manage a refinanced mortgage that they also can't afford.

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