NY Feds Post a Scary Financial Article

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The New York Fed warns that if we have another 2008 crisis, we will be in much worse shape than last time. Also, the risk is growing. Then there is Biden’s latest fiasco with putting Americans on the hook for risky mortgage loans.

  • The system may be disproportionately exposed to financial and economic instability.
  • Bank-NBFI dependencies become vectors of shock transmission and amplification, forcing authorities to intervene heavily.
  • The commonality of asset holdings between banks and NBFIs could be an important source of market disruption, driven by asset-pricing dislocations in the event of forced asset sales by NBFIs in need of liquidity. It could be rather severe.
  • The entire system of financial intermediation is potentially more fragile because of the interconnections.
  • There is a contagion factor.

As if that isn’t bad enough, the Biden administration has approved a move that could essentially put taxpayers on the hook for risky borrowing practices and potential real estate losses – and a former mortgage insider is sounding off on the plan.

PUTTING TAXPAYERS ON THE HOOK FOR RISKY MORTGAGE LOANS

“The people who should be really mad, I think, are first-time homebuyers who are trying to get their foot in the housing market. They can’t because housing is unaffordable,” Structured Finance Association CEO Michael Bright, also a former president of Freddie Mac and Fannie Mae sister company Ginnie May, said on “The Bottom Line” Tuesday.

“This is going to exacerbate that problem.”

Mortgage giant Freddie Mac received the green light from the White House to offer second-lien mortgages, aiming to help homeowners who are locked into lower rates access their home equity.

“Freddie Mac is doing this, but Fannie Mae is going to have to follow. They always do,” the CEO said. “I really think we’ve jumped the shark on this one. Having the government subsidize and incentivize equity extraction through second mortgages we’re not solving any problems in our economy. Consumer spending is actually too high. The Fed is working on that through inflation.”

The peasants will get to pay for the mortgages that go unpaid.


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