The lead sentence in a Bloomberg News report Tuesday morning:
There's a greater than 50 percent probability that the financial system "will come to a grinding halt" because of losses from mortgages, Gregory Peters, head of credit strategy at Morgan Stanley, said.
Quick! Check the stock ticker -- Wall Street must be going ballistic, right? Oh, wait the Dow Jones industrial average is up 279 points (as of 3:33 EST.) and NASDAQ and the S&P 500 are doing even better. The early analysis suggests that Wal-Mart's healthy sales numbers and a decline in the price of crude oil are lifting spirits. So what if Bank of America announced a $3 billion dollar writedown "reflect a drop in value of securities related to mortgages." $3 billion's nothing.
Heck -- the very same day BofA also announced it was going to book a $16 billion dollar profit this quarter based on the appreciating value of a big chunk of stock in the Chinese Construction Bank it bought in 2005. According to BofA's chief financial officer, "on paper we have a potential gain in excess of $30 billion."
So what's an itty-bitty $3 billion dollar writedown of CDOs compared to megaprofits on the Chinese bourse? It's all good. Unless the Chinese stock market crashes, of course. Which could happen, if the mortgage mess brings "the financial system" to a grinding halt, or if American consumers, pinched by the declining dollar and their own lack of access to cheap home equity financing, stop buying Chinese goods.
But nothing going down on Wall Street today quite matches in ludicrousness reports beginning to arrive from the National Association of Realtors' annual convention, which kicked off on Monday in Las Vegas with a skit called "Realtor Scene Investigation."
The Seattle Post-Intelligencer's Audrey Cohen was there, and reports that the show featured NAR chief economist Lawrence Yun "sitting in a 'crime lab' wearing a white coat."
2007, Yun tells the crowd, still has "strong fundamentals" even though there are some problems, including "high foreclosures brought on by 'toxic' loans and, in reaction, tighter credit making it harder to get mortgages."
So, who's to blame?
Suspects include the Federal Deposit Insurance Corp., the Treasury Department, the Federal Reserve, Fannie Mae and Freddie Mac
"They let some baaaad people into the (mortgage) business," one of the Realtor "investigators" reported. "If the 'five families' had been doing their jobs we could have prevented this mortgage mess."
I suppose gallows humor isn't required to be funny. And the writers are on strike. But isn't it strange how the "suspects" here are all government or government-sponsored entities. The realtors who pumped up the market until long after it was already crashing, the mortgage lenders who stoked the feeding frenzy, the investment banks who provided liquidity to the lenders... seems like there was a lot of baaaadness to go around. Sure, if government had been doing its job, perhaps the worst excesses could have been avoided. But to attempt to pin this crime wholly on them isn't supported by the evidence. Sorry, but the DNA just doesn't match.