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The Next Mortgage Crisis 2010 is Coming
The next mortgage crisis 2010 is on the horizon. This could be as bad as the United States sub-prime mortgage crisis 2009. Most people feel that the economy is recovering. The U.S. stock market reflects that opinion. The housing market has improved as sales increase and home prices stabilize. We are not seeing as many foreclosures as we saw a few months ago.
The gross domestic product grew in the third quarter at a 2.8% rate, the first increase in several quarters.
The Leading Economic Indicator (LEI), published by the Conference Board, increased at a rate of 4.2% in October. This was the seventh month in a row that there has been an increase. These LEI numbers give a good indication that the economy will continue to grow.
Federal Reserve Chairman Ben Bernanke proudly asserts that the worst is behind us thanks to his wise manipulation of the economy. It's interesting that Bernanke and the Fed feel they can bring us out of the recession when they had no clue that their low interest rates and extremely stimulative policies were a major factor in putting us in a recession by causing the housing real estate bubble.
When the housing real estate bubble burst, the Fed had no idea just how severe the crisis was. Bernanke assured everyone that the housing market disturbance was contained and would not be a problem going forward. He later claimed that the losses from the housing market issue would be less than $100 billion. Total losses far exceeded that amount. Unfortunately, many people followed his advice and had major losses in their stock market portfolio.
The federal government bank stress tests were concluded earlier this year. Bernanke assured us all by saying that "most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized." But as of today, banks continue to hold onto the money given to them by the federal government and aren't willing to loan it out.
How can we trust the Fed and Bernanke to lead us out of this recession when they have such a horrible track record? Bernanke feels that his policies can control the financial markets. Bernanke feels that he is smarter than the market. He is not willing to trust the natural economic forces to help solve our problems. History shows that he is wrong.
If the economy is improving, as Bernanke says, why is the Fed keeping interest rates near zero and maintaining such accommodative policies?
We have moved beyond the United States sub-prime mortgage crisis 2009. The period between September - December, 2009, is the lowest point of the mortgage resets. Therefore, the housing market and foreclosure problem should be improving today, just like it is.
But another mortgage crisis is soon coming. In the second quarter of 2010 through the fourth quarter of 2011, there will be a significant number of mortgage rate resets in Alt-A and Option-ARM mortgages. Most of these mortgages were established during the peak years of the housing real estate bubble. As a result, these mortgages now have an extremely high loan to value ratio and will further aggravate the foreclosure problem.
This new foreclosure problem will cause further writedowns on the books of U.S. banks. This is the reason that the Fed and Bernanke are keeping such accommodative policies. They are very well aware that the next mortgage crisis 2010 will cause major problems for the banks. Most Americans are completely unaware that this event is on the horizon.
A strong economic recovery is important to many corporate professionals. Some have lost jobs, and a strong recovery will help them find employment. Others are feeling job insecurity and hope that a recovery will improve the financial picture for their companies.
President Obama feels that all of his stimulative policies have had a powerful impact on the economy. Although he remains cautiously optimistic, he feels that the economy will continue to grow. The statements made by the Federal Reserve indicate their belief that their policies have worked.
I hope that what they are saying is correct. But I feel that we still have major problems to overcome. Because of our very uncertain economy, I recommend that employees set up a job backup plan that can protect them in the case of loss of income of a family member. The internet marketing industry is a recession proof alternative that needs to be considered.
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