The Financial Crisis: An Interview with George Soros (NY Review of Books)

[struggle4progress]

Volume 55, Number 8 · May 15, 2008

By George Soros, Judy Woodruff

...
George Soros: ... Unfortunately, we have an idea of market fundamentalism, which is now the dominant ideology, holding that markets are self-correcting; and this is false because it's generally the intervention of the authorities that saves the markets when they get into trouble. Since 1980, we have had about five or six crises: the international banking crisis in 1982, the bankruptcy of Continental Illinois in 1984, and the failure of Long-Term Capital Management in 1998, to name only three.

Each time, it's the authorities that bail out the market, or organize companies to do so. So the regulators have precedents they should be aware of. But somehow this idea that markets tend to equilibrium and that deviations are random has gained acceptance and all of these fancy instruments for investment have been built on them ...

In February, the rate of decline in housing prices was 25 percent per annum, so it's accelerating. Now, foreclosures are going to add to the supply of housing a very large number of properties because the annual rate of new houses built is about 600,000. There are about six million subprime mortgages outstanding, 40 percent of which will likely go into default in the next two years. And then you have the adjustable-rate mortgages and other flexible loans.

Problems with such adjustable-rate mortgages are going to be of about the same magnitude as with subprime mortgages. So you'll have maybe five million more defaults facing you over the next several years. Now, it takes time before a foreclosure actually is completed. So right now you have perhaps no more than 10,000 to 20,000 houses coming into the supply on the market. But that's going to build up. So the idea that somehow in the second half of this year the economy is going to improve I find totally unbelievable ...

http://www.nybooks.com/articles/21352

[sbyte]

1. the Trillion dollar bailout.

Why bailout wall street banks? They are not even chartered banks. They will be getting one trillion dollars. With the fed taking Mortgage Backed Securities for collateral. If Those Securities return forty percent of their value and the FED is stuck holding them, who cares.
The government is out another 600 billion dollars.

I just did them Math. One Trillion dollars in loans given as backing to pay or refinance or renegotiate the current mess the homeowner finds themselves in equal $200,000 to each of the five million homes that are in distress. Why not give the homeowners similar deal given to wall street, a low interest loan good for at least a year to help pay current mortgage payments while better financing is arranged. This will guarantee that houses remain a livable homes and it puts real government pressure on the mortgage holders to renegotiate.

[struggle4progress]

2. Bankruptin th'guvmint with big transfers t'th'rulin class: it's The Ownership Society™

[AdHocSolver]

3. Idiot! Your plan will help the American people, not help enrich a bunch of wealthy crooks.

What is wrong with your brain?

:sarcasm: