60 Minutes - Sub Prime - High Net Worth
Monday January 28, 2008
60 Minutes Package on Sub Prime Mortgage Mess and Comments by Jim Cramer from CNBC's Mad Money give a glimpse into the Abyss.
Jim Cramer appeared on special edition of "High Net Worth" a news magazine show for investor's on Friday night Jan. 25, 2008. He made reference to the Fed rate cut from earlier in the week and I will paraphrase his comments. Basically he put forth the hypothesis that the Fed made an emergency rate cut of 75 basis points to prevent the failure of a large US bank. He felt that at some point in the future we might learn which bank was on the verge of collapse. This is how I understood the comments, my apologies if this is not correct and I will certainly print a retraction if I have this wrong, but this is how I remember the conversation going. I expect that Mr. Cramer is correct. I will go one step further and add to this in saying, if I were an investigator and wanted to try and prove or disprove this hypothesis, I would look into the mortgage backed derivatives trades that were being unwound by the French bank Societe Generale during the hours prior to the Fed making the rate cut. I think that the details of this action and the Fed cut are intertwined. It is a hunch. Oh and I nearly forgot, Tim Seymour was on High Net Worth, we love the Ambassador.
60 Minutes did a package on the sub prime mortgage mess. It seems that Stockton CA. is now the foreclosure capital of the US. The numbers were sobering. The piece was entitled The House of Cards. It seems that some of the homes in foreclosure were borrowed against at more than 100% of value. Some borrowers put cash in their pocket at close of escrow and had no down payment money in the house. In some cases, not all, the borrowers lived in a home for as many as three years rent free. The price is a destroyed credit rating for a few years. The most memorable quote on the show was when Steve Kroft asked Jim Grant about containment of the problem.
Here is an excerpt. "Alan Greenspan and his successor, Ben Bernanke, would say over and over that it's contained. The problem's contained. It turns out, it is contained only on planet Earth," Grant says, laughing. "That's it."
"It's still spreading?" Kroft asks.
"Yeah," Grant says. .