It's official. The "R" word has been unsheathed. This morning US Treasury Secretary Henry Paulson described the economy as being in "sharp decline." The mention is the closest he has come yet to conceding an election-year recession has set in.
Adding to this grim admission is the just announced Fed rate cut. The Federal Reserve slashed a key interest rate by three-quarters of a percentage point moments ago. The big question is, will it be effective? Rates have already been cut 2.25 percent since September.
Talking about money is just one of those things that's uncomfortable to do in polite society — some might even argue it's downright vulgar. But with the economic news tumbling out of Washington today, you'll just have to excuse our rudeness. The Daily Show however doesn't have any compuction skewering the national pocketbook. For a desperately need money-related chuckle, read more.
Tod's
Darphin
Fontanelli
I'm not worried! With President Hoover in the White House, he'll protect the common man's interest!
1LMAO.
2He is making important decisions with what to pay for in terms of a wedding. We are not in a Recession as he said, I believe god told him that and he said we are in a little rough patch. I believe him.
3but bushy said our economy is good, u mean he lied
4No ZP, President Bush never lies. We are just hitting a rough patch.
5I thought Republicans were supposed to be the party of fiscal responsibility?
6Jill of course they are, this is the Dems fault that we are going through--coughs rough times.
7Bush is by no means a conservative. A Republican, yes, but he i far away from being a conservative.
8I also think it is important to note that our current state of the economy isn't due to republicans or democrats, but instead rests with the irresponsible choices of mortgage lenders, those who took out mortgages they couldn't afford and those who have charged their way into debt.
9I love how the officials are tap-dancing around the "recession" word. Doesn't matter what you call it, I guess — lots of people are feeling the pinch either way, right?
10"but instead rests with the irresponsible choices of mortgage lenders, those who took out mortgages they couldn't afford and those who have charged their way into debt."
Have lending laws changed recently? It seems that this was a group effort at the same time.
11My point is that Bush neither lended the money nor took out the loans that are a large part of our current situation.
12I understand that Mellowman, but I "heard" that legislation passed that enabled these lenders to do what they did. I didn't know if anyone else knew anything about that, or if it was simply a fact-lacking rumor. Gotta watch out for those!
13Jillness, is that a sense of humor sneaking through?
Honestly, I'm not familiar with any laws being passed specifically that opened the flood gates on these mortgages.
My understanding of the situation is that there were two areas which led us down this road:
1. Complaints that the mortgage industry was being too strict with its lending practices and that it was hard for many lower class people to get mortgages. Industry practices were loosened as a result, which is part of how we walked down this road.
2. The more complicated and also more important reasons for the lessening of the standards fall s towards Wall Street, the mortgage lenders and investors. Here are some excepts from an article which I believe is more well spoken than I am on the subject:
"Critics say the demand for mortgage-backed securities backed by subprime mortgage loans led originators to loosen their underwriting practices, with a resulting increase in delinquencies and foreclosures."
""In the simplest terms, the secondary market has enabled the subprime crisis," said Michael Calhoun, president of the Center for Responsible Lending, in his prepared testimony before the Subcommittee on Financial Institutions and Consumer Credit. "Much of the growth in subprime lending has been spurred by investors' appetite for high-risk mortgages that provide a high yield."
Hybrid adjustable-rate mortgages with two- or three-year initial "teaser" rates (2/28 and 3/27 ARMs) made up 81 percent of the subprime loans packaged as investment securities in the first half of 2006, Calhoun said, compared with 64 percent in 2002.
Such loans had "extremely high prepayment rates," as borrowers refinanced to avoid higher monthly payments when interest rates on the loans adjusted, Calhoun said.
Prepayment is usually a risk investors in mortgage-backed securities try to avoid. But Calhoun said investors in some tranches of MBS received "significant income" from prepayment penalties borrowers paid in order to refinance.
Calhoun said the short loan terms of ARM loans -- typically 2 1/2 years -- benefit brokers and lenders, who earn fees based on the number of loans they originate, and the ratings agencies and investment banks who profit from pooling loans and selling them as securities."
14You mean we're in a rec, err, cascading economical downturn? >.
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