Monday, February 09, 2009

No Mortgage Workout, No Recovery

From the Hussman Report:

“What the Federal Reserve has done and what the Treasury has done, by and large, is to take an existing debt and say they will own it or lend against it. But they haven't said they are going to write down the debt and cut debt payments each month. There has been little in the way of debt relief yet. Very, very few actual mortgages have been restructured. Very little corporate debt has been restructured. The reason it hasn't actually produced increased credit activity is because the debtors are still too indebted and not able to properly service the debt.

“If you think that restructuring the banks is going to get lending going again and you don't restructure the other pieces -- the mortgage piece, the corporate piece, the real-estate piece -- you are wrong, because they need financially sound entities to lend to, and that won't happen until there are restructurings."

What I've been saying for almost a year now, until the foreclosure problem is dealt with, the economy will not be able to move on. This is the third priority of the President......not a good sign.

Scott Dauenhauer CFP, MSFP, AIF