Foreclosures will become the source of the next financial crisis. Why do you think Bank of America is halting foreclosures in all 50 states now?
They know they're screwed... We know they're screwed...
But are you really surprised?
Our banking industry, which screwed itself, is watching as operating costs rise thanks to foreclosures and defaults.
“We are less than one-quarter of the way through the foreclosure process,” said Christopher Whalen, managing director at Institutional Risk Analytics at an American Enterprise Institute event. “Rising operating costs in banks will be more significant than in past recessions and could force the U.S. government to restructure some large lenders as expenses overwhelm revenue.”
And, yep, tax payers will be on the hook again.
Whalen argues that the largest U.S. banks remain insolvent and must continue to shrink. “Failure by the Obama administration to restructure the largest banks during 2007-2009 period only means that this process is going to occur over next three to five years — whether we like it or not. The issue is recognizing existing losses — not if a loss occurred,” he said.
You can listen to more of Whalen's comments in this video:
I don't care how much the omnipotent Jim Cramer thinks “housing can't hurt us any more.”
He hasn't a clue what he's talking about. Remember, this was the same guy that missed the subprime debacle... and said it wouldn't hurt the economy. He was also the guy that said to stay with Bear Stearns and then had to backtrack and say he wasn't talking about the stock.
Truth is – housing will kill us going forward. What does Cramer think will happen when housing drops more and sends unemployment through the roof? Does he not see half the builders, remodelers, realtors, and banking people losing jobs over this mess?