Experts: ‘Credit recession’ could last two years

[Amerigo Vespucci]

Source: MSNBC

NEW YORK - A “credit recession” sparked by the U.S. housing market downturn and excesses in structured finance may last more than two years, and the financial sector will undergo “massive consolidation,” leading Wall Street strategists said on Wednesday.

The fallout from deteriorating subprime mortgages and the broader housing and credit crisis will eventually lead to a healthier market, but not until after a prolonged purging process, Jack Malvey, Lehman Brothers Holdings Inc’s chief global fixed-income strategist, said in New York.

“We’re going through a tough spell with regard to credit,” Malvey said at a Securities Industry and Financial Markets Association conference.

The “subprime debacle” due to years of excess and easy credit will be followed by years of tight credit, Malvey said.

Read more: http://www.msnbc.msn.com/id/24970522/

[Warpy]

1. TWO years?

That's how long it will take those AltA/Jumbo loans to reset. The fallout is going to last a lot longer than that as an oversupply of the wrong type of housing continues to drive house values down, putting people with stellar credit and 30 year fixed mortgages into jeopardy as they get into an upside down mortgage situation, owing more than the house is worth. People are going to have to look at prevailing rents to figure out whether or not to take the loss or to continue to pay a loan on an inflated price.

My guess is that it'll take at least five years for this to churn through the system and more likely ten.

[notesdev]

2. Right now

we're looking at about six years of oversupply in some markets, and there's no reason to think that number won't increase.

I don't see us hitting bottom until at least 2012, and who knows what may happen between now and then to extend the depression.

Yes, I used the word 'depression'. This is not a recession we're heading into, this is a Great Depression scale economic catastrophe.

And then, as now, the problem is traceable to the same source - the Federal Reserve, and its unconstitutional execution of the Congressional power to coin money. Yes, technically they don't mint currency, but money and currency are two separate and distinct things.

[Warpy]

3. It's not the Fed, it's Congress

which has been dominated for far too many years by deregulation-happy conservatives in both parties.

When financial markets are deregulated, the thieves rush in and set up shop. The same thing happened back in the 1920s. You get a few years of false prosperity propped up by debt and then the whole thing crashes.

Conservative fiscal dogma never changes and it's always wrong.

[Hydra]

6. That's what the fed would like you to think

They keep claiming that they can do nothing...while they keep the money from flowing downwards.

This is a massive feeding frenzy for them. I can't wait til they get the law that allows them to invest in businesses that they were pushing for last year. Then they can buy up all of America with funny-money.

[PSPS]

4. They keep calling it a "credit" problem when it's really a "debt" problem.

It's as if all we have to do is just free up more "credit" and all will be happy. The real problem is the crushing debt everyone has taken on, using their houses as ATM's, financing their lifestyle on maxed-out credit cards, and even the US being the largest debtor nation in the history of the world when it used to be a creditor nation prior to the stain of reagan.

[Phred42]

5. Exactly

Check this out

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=103&topic_id=363445&mesg_id=363445

And Kevin Phillips latest

[notesdev]

7. At a certain point

it doesn't matter how much 'credit' or 'liquidity' is out there, if no one is able or willing to take on additional debt.

We reached that point this past November.

What we have here is not a credit crisis, but a solvency crisis. Citibank, largest bank in the world, is leveraged 19:1, and it is not at all unique in the financial sector.