If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Heads up, this is going to be a bit of a rant.

I was reading through Ben Bernanke’s comments on the state of the economy and real estate from yesterday (transcript here) and I came across a nugget of information. Essentially, of the loans outstanding,

• 15% of subprime loans are 90 days or more late
• 3% of Alt-A loans are 90 days or more late
• less than 1% of Prime loans are 90 days or more late

So I said to myself, we have a group of financial companies that have access to the best in technology and brainpower to determine the risks in determining risk factors in loans. The have access to the best data in the world on actuary and risk assessment. Yet, these same lenders and financial titans have made some grievous errors in their calculations  and made billions of dollars of loans that can never be paid back.

Or have they?

If you follow Manhattan real estate, values there have been propped up by the incredible profits Wall Street has created over the past few years. Much, not all, but much of the money has been generated by the investment into securitized mortgages, consisting of subprime, Alt-A, and Prime loans.

Now the combination of a hyperactive real estate market that is pulling back and interest rates that are creeping up have put many of these loans in jeopardy and thrown an industry into turmoil.

But my question to you is, why are we so concerned now with bailing out Wall Street? If anyone should have seen this coming, it is the financial institutions that have the brain power and technical prowess to predict this scenerio. I can not imagine that the powers that be could not see that there was a top to the housing market or that interest rates would come off their historic lows.

I typically am not a big conspiracy sort of person, but it is nagging at me that Wall Street pocketed the money on the upside and now are playing a game of chicken with the economy. Wall Street is counting on the Federal Reserve and the Federal Government to bail them out on the downside. With it being an election year the odds of a government bailout of the industry is going to be almost guaranteed.

So, essentially I am left to believe that Manhattan real estate prices and the huge profits generated by Wall Street are being subsidized by you and I, the American taxpayer.

And that does not thrill me.

Other Posts You May Be Interested In:

• Wachovia Offers No Prepayment Penalty on Pick A Pay Loans
• Thank You Sponsors
• Homes of Presidents of the United States 1st Washington to 9th Harrison
• Who Can Afford That? asks David Lereah
• Tax Liens, The United Nations, Diplomatic Immunity, and the City of New York