Credit market

Articles on the mortgage and credit markets. Credit market dysfunction played an enormous role in the housing bubble and, as such, used to be a fairly big focus of this site. At this point, however, the topic has been pretty thoroughly exposed even in the mainstream media and blogs such as Calculated Risk and HousingWire cover the credit markets in a much more thorough manner than I could. For that reason, I have shifted my focus to the aftermath of the credit bubble as it pertains specifically to housing. More recent commentary is found either in the Housing Market or VoiceofSanDiego.org topics.

E-Z Credit Under Fire

Submitted by Rich Toscano on November 29, 2005 - 10:59am

John Dugan, the new-ish head of OCC (Office of the Comptroller of the Currency—a federal banking regulator), isn't a big fan of "exotic mortgages."

Those with some free time can read a recent speech that Dugan delivered regarding "non-traditional mortgages." The executive summary: they have their legitimate uses, but these legitimate uses don't include helping people stretch financially to buy more house than they could afford otherwise. Here's a snippet on everyone's new favorite, the option-ARM:

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Reflexive Disinterwhatnow?

Submitted by Rich Toscano on November 29, 2005 - 9:46am
I often disagree with PIMCO's Paul McCulley, but he is a very smart guy with unique insights. His latest Fed Focus is a an interesting, if quite heavy, interpretation of how the Fed may be different under Bernanke.
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Denial is Not Just a River in San Bernardino

Submitted by Rich Toscano on November 27, 2005 - 11:12am

This LA Daily News article about the San Bernardino housing market comes tantalizingly close, but in the end is unable to connect the dots. Their logic follows:

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Monthly Credit Market Report: October 2005

Submitted by Rich Toscano on October 28, 2005 - 4:49pm
You may recall from last month's credit market report that I was expecting ARM rates to rise. But even I didn't think they'd head so high, so fast. Read on for a look at the chart that should (but probably doesn't) have the real estate bulls seriously concerned.
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Bernanke and the Real Estate Market

Submitted by Rich Toscano on October 24, 2005 - 4:52pm
To no one's great surprise, Ben Bernanke has been chosen as the next chairman of the Federal Reserve. What, if anything, does this mean for housing?
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Monthly Credit Market Report: September 2005

Submitted by Rich Toscano on September 29, 2005 - 5:30pm
Governments like a little bit of inflation. Inflation basically acts as hidden tax, allowing the government to run up a lot of debt and then sit back while that debt is inflated away. What governments avoid like the plague are increasing expectations of inflation. When the populace starts to feel that inflation is rising, business owners preemptively raise prices and consumers start bidding prices up by buying more now to avoid increased prices later. The resulting price increases reinforce the public perception that inflation is on the rise, which only encourages more price-increasing behavior, and the cycle continues.
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Japanese Vote "No" on U.S. Housing Bubble

Submitted by Rich Toscano on September 13, 2005 - 6:14pm
This past weekend, Japanese voters overwhelmingly endorsed prime minister Junichiro Koizumi's plan to privatize the Japanese postal system. What, you may rightly ask, does mailing a letter in Japan have to do with buying a house in San Diego? To which I answer: potentially quite a bit.

Japan Post, you see, is more than just a post office. It is a massively subsidized behemoth that, in addition to delivering mail, offers insurance and banking services to all of Japan. It is, as a matter of fact, the biggest financial institution in the world, and it controls over $3 trillion in financial assets.

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Monthly Credit Market Report: August 2005

Submitted by Rich Toscano on August 28, 2005 - 6:21pm
Is Greenspan intent on deflating the housing bubble? If so, watch out.
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Monthly Credit Market Report: July 2005

Submitted by Rich Toscano on July 27, 2005 - 9:42pm
There was big news in the bond market this month: China has finally relented to international pressure and revalued its currency. After over a decade of being pegged at a fixed rate to the dollar, the Chinese yuan was allowed to appreciate by 2.1% and will be pegged to an unspecified basket of currencies rather than to the dollar itself.
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On Rates, Part II: Will They Stay This Low?

Submitted by Rich Toscano on July 16, 2005 - 9:52pm
In the first bond rate article, I discussed several factors that have helped to keep long-term yields low. The piece concluded thusly:
It's quite the virtuous cycle, for now, and bond yields will continue to remain low as long as all these factors remain in place. But how long will they remain in place?
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On Rates, Part I: Why Are They So Low?

Submitted by Rich Toscano on July 9, 2005 - 9:55pm
It is counterintuitive that US long-term interest rates have remained so low in the face of Fed rate hikes, record low household savings, record high trade and fiscal deficits, steeply rising energy and commodity prices, and unprecedented home equity-related wealth creation. This article discusses five factors that have interacted to help keep rates so low in spite of the above.
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Monthly Credit Market Report: June 2005

Submitted by Rich Toscano on June 22, 2005 - 10:01pm
As I've prattled on about endlessly, generational-low interest rates are a critical element in allowing San Diego home prices to remain so high compared to incomes. One cannot, therefore, gauge the health of the real estate market without understanding the health of the credit market.

Not that it's terribly easy to do so—the greatest financial minds in the world cannot seem to agree with each other about what drives the bond markets and where yields will go. As a matter of fact, they can't even agree with themselves.

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