They're back.....

MBS are fine if they are backed by quality loans/borrowers. There is nothing wrong with these securities. It was that 5% increase in homeownership using subprime that got the banks into trouble. Historically 68% of the population are homeowners the rest rent. In the easy credit days that 68 went to 73 a no no as these people just bought b/c they could when they should have been renting.

At these levels MBS have no where to go but down.

"...a no no as these people just bought b/c they could when they should have been renting."

Seems to me people are still doing that and others on here are advising others to do just that...

people want yield

Even as lenders struggle to pull themselves out of the credit crisis, signs of a new and potentially dangerous infatuation with risky borrowers are emerging. From credit cards to auto loans to mortgages, the hunger for new business as the crisis ebbs is causing some financial institutions to weaken lending standards and woo borrowers who mightn't be able to pay.

Lenders said they learned their lesson when the real-estate bubble burst and are being careful as the credit spigot is loosened.

"Everyone here is very mindful of the financial disruptions we've all come out of and making sure we follow appropriate standards," says Gina Proia, a spokeswoman for Ally Financial Inc., the auto lender formerly called GMAC Financial Services.

Kathleen Day, a spokeswoman for the Center for Responsible Lending, said the consumer group is "seeing banks re-enter the subprime market at a steady clip and make loans to borrowers who don't have the ability to repay."

Some lenders said they are willing to stretch because borrowers who take on credit in the early stages of an economic recovery often are less risky and thus more profitable than those who borrow later. Federal Reserve Bank of St. Louis economist Williams Emmons said some credit loosening is normal given the U.S. economy's growth since the end of the recession.

Malissa Peloquin, 40, of Bolingbrook, Ill., said she has received six credit-card offers since she and her husband emerged from bankruptcy in June. She still owes more than $73,000 in student loans.

"All these offers say…'You qualify,' " she said. "No, I don't."

http://online.wsj.com/article/SB10001424052748704746804575367172177309754.html

Yes, we have very short memories. I wish we could have fixed the too big to fail problem when we had the chance.

We won't be fixing that problem now. Rubin, Summers & Geithner like having four big banks running the country. They believe it adds to stability and not the other way around. They will argue that breaking up the banks is too dangerous and will limit lending and make us uncompetitive with the French,Germans,Brittish, Chinese and Japanese. They also like knowing they can get four guys in a room and make a deal. You can't do the same with hundreds of smaller players.

They do not care that having an oligolopoly makes us pay more for services and creates systemic risk and limits true innovation and competition.

Sunday, people who shouldn't be buying can't because they don't have the cream corn credit available(very loose credit) like 3 years ago.

Yes I plant the flag for the term Cream Corn Credit. It's mine. Copyright 7/15/10 by SteveF :)

If we can have "green shoots" we can have "cream corn credit"

RS - again, a dumb analysis. While I agree that the government does like having 3 big banks (Citigroup really isn't a US retail player), breaking the banks up will do nothing: you wind up with the opposite problem, where banks will have too much exposure to certain smaller markets, increasing risk. It's what almost did away with BofA in the 1980's - overexposure to California agriculture - and the S&L industry, which is now officially dead.

Banking IS inherently risky; it's not the size of the bank that matters, it's its risk management. Hence the Volcker Rule. If you recall your history, when the Penn Central Railroad failed (MetroNorth today) it took down Continental Illinois, which brought down Seattle First National Bank (SeaFirst), the latter of which was bought by BofA at the time, the former of which is now part of BofA as well.

Retail banking is a low margin commodity business: what increases profitability is increasing scale, processing more transactions, because each transaction has a lower marginal cost. Competition is fierce between BofA, Chase, and Wells Fargo, not to mention their competition with regional banks. I had BofA, switched to Chase, now am with Sovereign (Santander) because they charge no fees & have no minimum deposits. Occasionally I have to pay a few bucks to use someone else's ATM, but in the end it's a lot cheaper than keeping minimum balances and paying for everything BUT the ATM.

steveF : I like that "Cream Corn Credit". Have you also applied to copyright "Creamed Corn Credit"?

" Creamy Corn Credit"?

"Creamed Broccoli Credit"?

" Creamy Niblets Credit" ?

"From the valley of the jolly, ho, ho, ho;
steveF" ?

truth: damn! it is creamed you own it now. I better hurry up and get the domain for it...

steveF: No problem. I was going to suggest that you get the domain.

Then, you can be the master of your own "Creamed Corn" domain.

Sounds dirty.

Also corny.

You know corny, Alan.

That's the truth, Truth!

> MBS are fine if they are backed by quality loans/borrowers.

lol, They are gonna keep on being backed by the taxpayer's inability to understand that he's being milked by guarantying them... Meanwhile he's told is that the government is doing everything in its power to "keep the dream (of homebuying being a no-lose proposition) alive"... Oh dream Joe 6 packs, you'll pay one way or the other.

me thinks that part of the econ problem is that the failed religiosity of the dream of homeownership hadn't been replaced yet by another delusional "let's get rich quick" dream many people could fall for.

"Change we can believe in" is maybe another big scheme. Another "let's roll the dice", "if it worked for me, why not for you?"... BS that at the end of the day also ends up redistributing $ from the naive to the financially literate?

Truth....I found you!
{passing the corny cream}

Come as you are,
Pay as you go.