http://www.msnbc.msn.com/id/20393984/

The full ramifications of the so-called housing boom have yet to really be discussed by the media experts or even here for that matter. The effects on our society are myriad, catastrophic and sad. There are plenty of hidden prices to be paid.

First, the huge change was from the days of private local builders, the sorts of small companies (by today’s standards) that build early suburbs in my day or the inner historical parts of our cities, to publicly-traded mega companies whose primary duty was to return shareholders’ equity and turn out more and more product, faster and faster.

Rather than build what was truly needed (higher density, low cost housing in central areas as Dr. HB has many times pointed out), these companies (Toll, Beazer (sleazer), etc) spent the last decade creating immense sprawl of cookie cutter condos and McMansions nationwide.

The construction quality on even the $1 million McMansions was so clearly shoddy compared to historical standards, these things would never make it to the next century. It was so OBVIOUS.
To keep shareholders happy, what do you think they did?

This massive sprawl has:
1) created gigantic infrastructure problems to maintain highways, sewers, utilities, etc, etc. in an ever-increasing dispersed manner. These are paid by us, the middle-class taxpayers, not Tony Mozilo or the Toll Brothers.

2) taken out of production, forever, valuable agricultural land, especially in places like the Central Valley and coastal California (where do you think your orange juice comes from)

3) destroyed huge swathes of wildland driving many plant and animal species closer to extinction (again, especially true in complex biological coastal zones of various states)

4) As these neighborhoods crash in value, provide little tax revenue, they will have to be maintained by more and more tax monies from productive sectors

5) Some of these suburban neighborhoods will rapidly turn into gang-infested Section 8 “new” slums, with shoddy construction feeding upon itself — national blight.

If you think this all extreme, just travel to some of the already new ghost towns in the Inland Empire of southern California, or the high desert or Stockton or fill in the blank.

It’s all very sad and was for nothing. So people could “flip” 3, 4, 6, 20 houses? That doesn’t build neighborhoods, communities or societies.

Joe and Susie are now the prime indicator. It’s all on their backs.

We have folks in the bubble and those that are out of the bubble. For the last 10 years people have been drawn into the bubble, and now they are being thrown out, literally.

Become debt free and get a non-bubblicious job and you are out of the bubble. The majority of folks that are smart are already outside of the bubble. Those that are left on the inside are the rubes and those trying to squeeze the last few dollars from the rubes.

Dems looking to unseat GWB have plenty of ammo already, thank you very much. No one wants to spend his or her two terms in office trying to dig out from under a big crash that happened in 2008. It’s in their interest to appear to save the day while blaming GWB for creating the problem in the first place.

Bernanke and Paulson have some wiggle room and I suspect they’ll use it. The Fed could lower the funds rate to 5% without significant damage to the dollar, which is gonna sink anyway no matter what they do. Arguably the rate is already too high. The fed’s problem all along has been that they really needed long term rates to go up so that the yield curve is more reflective of inflation and currency risk, and yet they can only directly set short-term rates. They’re like a guy trying to reposition a garden sprinker by wiggling the hose at the end connected to the tap. As for treasury, I don’t see much harm in bumping the jumbo level to 600k to increase liquidity, as long as credit quality metrics don’t change. If you’re holding 1000s of mortgages what’s the difference between 3x 400k mortgages and 2x 600k, if owner equity, DTI, FICO, etc. are the same.

As bad as things are, the majority of mortgages are eventually going to be repaid, and most of the rest will be harvested at some large fraction of their face value. I’ll bet smart money players are going to snap these instruments up at cents on the dollar and then look like geniuses a few years from now, just like buyers of junk bonds did in the 80s.

Seems they would want it to crash now so they can come in and “fix things” and blame their predecessors.

Too risky to have it crash on their watch – a la Hoover.

To try answering my own question, if the market were to crash now, I guess it could potentially taint all politicians, not just the White House, but Congress too.