Good Fed Hunting — Mish’s Rate Rant Burns Bernanke
Blame Ben. It is Fed Chairman Bernanke who threw up a “Wall of Capital Shame” in the face of Wall Street’s weakest moments last Fall.
Here’s what Mike Shedlock — a k a Mish — takes away from the galloping interest rates phenomenon that could imperil housing’s mini-relief rally.
Fed Is Out Of Control
What now Big Ben? You’ve already blown over a third of your $1.25 trillion commitment and all you have to show for it is more garbage on your balance sheet and a locked up refi market.
One thing is clear, Ben Bernanke and the Fed have lost control of the mortgage market (not that the Fed was ever in control in the first place). They weren’t. It was all an illusion.
If nothing else, Mish offers the healing powers of the verbally avenged. He’s far from being a lone voice in the desert. Author and investment advisor Arthur Laffer does some Fed hunting of his own in an op-ed piece in today’s Wall Street Journal.
About eight months ago, starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base — which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash — by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.
Interestingly, the interest rate bump puts buyers and sellers into even more of a squeeze getting to the finish line thanks to another fresh consequence of greed taking a backseat to fear in the home lending marketplace: the Home Valuation Code of Conduct. (See Big Builder editor Sarah Yaussi’s news and blog coverage of same).
Here’s more Mish dish on the issue from one of his trusted correspondents:
One problem is lenders are requiring applicants to put up $500 for appraisals and if the amounts do not come in, even if they miss by a tiny bit, the deal is denied and the applicant is out $500. Jeff had a $1.2 million sale fall through because an appraisal was $20K short.
A couple years back lenders were letting anything slide, now they appear to be looking for excuses to kill any deal, especially with the recent spike in rates. If the appraisal and paperwork is not perfect, goodbye loan and goodbye $500 appraisal fee. Customers are not too happy to say the least.
Apparently, Ben is not guilty when it comes to HVCC, which should not be confused with HVAC. Nonetheless, it’s fun and illuminating to hear Mish heat up and ventilate on just about anything he turns his attention to.
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