Monday, September 29, 2008

$700 Billion Is Just A Down Payment

There are at least $1.4 Trillion in toxic sub-prime loans out there. Expect Bush to ask for another $700 Billion shortly after the election. With over 110 banks looking very shaky the FDIC may need a bailout soon. Don’t worry, it gets worse. Starting next year a whole new group of flaky mortgages are going to start blowing up. These little darlings were interest only for four years after which you have to pay principal and interest meaning a big increase in payments. To add insult to injury the interest they have been paying was calculated as if they were paying principal so the excess interest is added to the principal. Unless the price of the house goes up you windup with negative equity and housing prices are going rather steeply down. Here are several trillion dollars worth of these little time bombs out there just waiting to go off. So that $1.4 Trillion in current bad debt is just a warm up.

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