The title of the article in MSN Money by Robert Walberg states, “No crisis for mortgage lenders.” He goes on to explain, in short, the following:
The U.S. mortgage market totals about $10 trillion, of which we may face losses of around $50 billion to $100 billion, according to Federal Reserve Chief Ben Bernanke. Those are big losses, but they represent no more than 1% of the overall total — hardly the definition of a crisis.
I agree with Walberg on this one. It’s easy to get caught up in things by only looking at one piece of a very complex puzzle, then think you know it all and start making important decisions. When you say, “Losses are expected to be $50 - $100 billion,” I say, “Wow! The sky is falling. When you say, “They’re going to experience a 1% loss.” I say, “Big deal. Retailers lose 10 - 15 times that much to shop lifters alone.”
It’s kind of like the perceived value of money. You wave a $100 bill in front of a 10 year old, it represents all the money in the world. You wave it in front of the executive that makes a seven-figure salary, it means nothing. It all comes down to how many zeros you’re accustomed to dealing with. This story is one you should read. It gives a very balanced feel for how things really are. Click here for the full story.
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