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I'm basing my guess on the fact that there is no documentation that the amount of bad mortgages runs in trillions. Also, banks generally aren't holding bad mortgages. They sold the risky ones and kept the safe ones. Some of the big financial enterprises that bought the loans are European. I can't see the US bailing out big European banks. Also, even though there are lots of defaults, there is some cushion because the majority of of borrowers who are paying those ARMs are paying the higher interest rates, meaning a much bigger take off the good mortgages. The first year of the crisis is worst because during that time the banks aren't able to bring the foreclosure to sale. Once the sales commence much of the lost money will be recovered.
The rule over at Kos is that extraordinary claims require extraordinary evidence. So I think its up to the ones spreading this alarm to provide more proof, not the ones who doubt it. For as long as I've been at DU these kind of predictions have been posted. We're all still here.
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