Wells Fargo: Housing Crisis Worst Since Great Depression

 

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Thursday, Nov. 15, 2007 11:10 a.m. EST NEW YORK -- Wells Fargo & Co, which has sidestepped many of the credit and liquidity problems plaguing U.S. mortgage lenders, believes the nation's housing slump is the worst since the Great Depression and is far from over, Chief Executive John Stumpf said.

Stumpf nevertheless said the second-largest U.S. mortgage lender and fifth-largest U.S. bank is well-positioned to ride out the storm, despite expectations for "elevated" credit losses from home equity loans into 2008.

And we are only in the early innings too.

So much for the "ownership society" touted a couple years back by "He who shall remain nameless, but who speaks to a 'higher Father'".

Next stop:  The Receivership Society.

 

 

 

 

From your article: 

Stumpf said the current downturn resulted in part from "froth, unscrupulous lenders, (and) borrowers who got too greedy," and called it the "steepest, fastest, most prolonged decline in residential real estate" in a long time.

"Once we reach the bottom, the (housing) inventory is going to come off pretty quickly," he said. "Once the secondary market gets comfortable with (credit) ratings again, and once you think you've hit bottom, I think we'll see some turnaround, and it could be faster than we've seen in the past."

Misplaced optimism? We all hope not. This thing amazes me. What amazes me the most is how many foreign bankers were throwing money into the system. There seems to always be an excess of capital desperately seeking homes. One bubble seems to replace one that just burst, in this case, the '90s Stock Market Bubble was replaced by a housing bubble.

If you can figure what bubbles next, you can make a lot of money. Just get out in time. 

Yes, but, the housing report on Bloombergs has a paragraph that states Condominium construction is taking up most of the slack that is being created by slow construction of single family dwellings.   Perhaps Wells Fargo is talking about bad loans which have already been made rather than what the market is doing now.   Just a guess.

uh

"One bubble seems to replace one that just burst, in this case, the '90s Stock Market Bubble was replaced by a housing bubble."

Like  japan market crash then a real estate bubble

at least we did not have 100 year mortgages. 

What we can say now is that the US is experiencing real inflation in the economy that is much higher than what is reported (6-8%). In addition to real inflation in the economy, the US has experienced hyperinflation in the financial economy—first in the stock market (the tech bubble between 1995-2000) and then in the mortgage, bond and real estate markets since 2000. If inflation continues to increase as I suspect in the real economy, I can guarantee you it will never show up in the CPI and PPI. Real inflation will be removed statistically through the magic of hedonics, geometric weighting, substitution, and seasonal adjustments.

This whole process of purposefully understating the real inflation rate also keeps real inflation artificially subdued. Think of all of the aspects of our economy that are tied to the CPI. Listed below are just a few examples:

• Wage and labor contracts

• Rents

• COLAs on pensions

• Market interest rates

Labor contract negotiations begin with CPI adjustments. Annual raises at companies are based on CPI changes. Think of how many workers fall further behind in their pay because of an understated CPI. How many landlords are cheated out of their just rents by understated inflation rates? How many retirees are robbed of real increases to their pensions as a result of underreported inflation? What would be the real rate of interest, if bond investors figured out that the real inflation rate was 6% and not 3% as reported by the BLS.