Today's Cartoon

Worst Management Practices

One interesting point about the recession is that it has generated plenty of articles about bad management practices... right at a time where many managers are telling employees that they are lucky to have a job.

An article from Business Week placed "Forced Ranking" as number 1 on the list of "brainless and injurious" management practices. I have written about failures of forced ranking in the past, it is interesting to see that it is coming in regularly as one of the worst practices. Hopefully it is a practice whose time has come and is now disappearing from the corporate landscape.

10 Management Practices to Axe
http://finance.yahoo.com/career-work/article/108815/ten-management-practices-to-axe

A Tale of Two Depressions

Finally, an article complete with charts that compares the economic decline in 1929 to the situation today. After reading the information, it leaves little doubt the the current scenario in terms of industrial output decline and other factors is worse than the 1930s. It only leaves the question if the government policy reponse of massive stimulus and bailouts will actually improve the economic recovery this time around.

A Tale of Two Depressions
http://www.voxeu.org/index.php?q=node/3421

The Ascent of Money

Earlier this week, PBS ran a special two hour program "The Ascent of Money". The program is an excellent overview of current financial crisis placed in context of other historical events. The show includes some excellent commentary and interview clips.

It can be watched online at:
http://www.pbs.org/wnet/ascentofmoney/

Crushing the American Family

Once in a while a cartoon comes along which really drives home a point. Despite political pundits waving their arms and claiming that we are not technically in a recession, the circumstances facing American families are so dire these proclamations are nearly meaningless.

The credit crunch, housing market, gas prices, job losses, and rising food costs have left consumers in a tough position. Families are having to cut back many activities and purchases simply to cover necessities - this is not good news for the two-thirds of the economy dependent on consumer spending.

Well for the good news - At least we are not technically in a recession!

Global Inflation: The New Crisis

A new monster has raised its ugly head to spook investors. Inflation is accelerating at a rapid pace providing policy makers with a new set of ulcers. Unfortunately basic antacid tablets will not cure the unsettled guts of national regulators.

The spike in inflation gives flashbacks to the dreaded 1970s with stagflation era. Many older investors do not enjoy reminiscing about interest rates above 14%, food rising in price each week, investors hoarding gold coins, and long gas lines. The dilemma is that all the statistics indicate that we are heading towards a scenario with run-away rising inflation worldwide.

Regulators have commented on rising inflation, raised interest rates in hopes of moderation, and are shocked to see the numbers running upward like an out-of-control train down the tracks. With rising commodity costs, pent up wage increase requirements, and tightening credit; there is not very much the regulators will be able to do to apply the brakes.

Certainly the news flow has not been encouraging, the ECB raised lending rates today amid record inflation, while U.S. Treasury Secretary Henry Paulson said inflation was becoming the top economic focus of many countries.

Inflation is a global phenomenon; impacting countries as diverse as Iran (with 26% inflation), the Philippines, Brazil, India, Russia, South Korea, Mexico, and Indonesia. No country is immune and no market is safe. Rapidly increasing inflation is the top concern in most nations, and the situation rapidly appears to be heading towards stagflation.

The immediate question becomes how should an investor prepare for this situation? The first emphasis is that a greater portion of your portfolio needs to be placed in commodities and precious metals, or in stocks focused on these industries. There is also a need to have your income oriented investments placed in vehicles which are inflation indexed in regards to interest rates. The other alternative is the keep cash in shorter term CDs as inflation and interest rates rise, allowing an investor to ride the rising curve.

Successful investing in a rising inflationary environment is difficult. Usually the stock market returns are dismal and many other investments are also victims of an inflationary spiral. Still it is best to keep your focus on the long term, and maintain a diversified portfolio of stocks that have wide economic moats. These companies invariably become stronger in downturns as competitors fall by the wayside.

Investors should pay close attention to news about inflation during the remainder of 2008 and start making appropriate adjustments to their portfolio to ride out the storm.

Is the Housing Crisis at its apex?

The news cycle continues a downward cycle on housing. Homeowners can not open a newspaper, turn on the news, or browse online without immediately getting hit with the latest negative housing commentary.

On the front page today, US foreclosure filings surge 48 percent in May. The continuous stream of downbeat real estate news may be a sign that the housing market has finally hit the bottom. In the same way, that the endless stream of news on how to get rich speculating on real estate in 2005 marked the real estate market peak. Interestingly, the spin today is how to get wealthy buying real estate foreclosures.

There is continuing statistical evidence that indicates that housing has turned the corner. In many markets, the number of days on the market is falling, along with the amount of unsold inventory. Coupled with the rate of price decreases slowing as buyers and sellers come into alignment of the new expectations regarding the proper value for a house now that the speculative bubble has burst.

The mortgage situation is also easing, as banks have returned to traditional lending standards. Financial institutions now have an improved comfort level for underwriting and re-selling proper quality loans – the credit crunch is slowly moderating.

The summer of 2008 may mark the actual bottom of the real estate plunge on a national level; some markets will face further price correction. However the path out of the crisis across the country will still be lengthy and painful, extending well into 2009.

Your Tax Dollars at work: Housing Bailout

Want to know where $1.7 Billion of your tax dollars are going? Thanks to Congress your money is going directly to bail out speculators and irresponsible lenders.

The Senate leaders moved closer today to passing a bill that would provide $300 billion in direct mortgages to homeowners; requiring a reduction in principal and cost basis so these homeowners will not be under-water. The majority of these homeowners would never have received loans under traditional lending criteria. Many will still go into foreclosure eventually even under a government financing program, leaving taxpayers holding the bag.

This Senate bill will be merged with an earlier bill passed in the House, Congressional analysts have estimated the House version of the bill would cost taxpayers $1.7 billion. It is an open question of how much the Senate measure would tack on to this.

Despite the twisting of words from politicians that Fannie Mae and Freddie Mac are actually “funding” the mortgage measure, the reality is that every last dime of this measure is backed by your tax dollars. So much for moral hazard, the only lesson learned in the housing fiasco will be that it pays to speculate in the housing market for both gamblers and financial institutions. Washington will always be happy to bail you out of your mistakes.

Dodd, Shelby Agree on $300 Billion Mortgage-Insurance Measure

Recession Proof Cities: Raleigh makes the list

With over 40,000 people moving to the RTP area each year, the Raleigh area has made another list - America's Recession-Proof Cities. Charlotte (NC) also made the top 10 list, as well as many cities in Texas.

Surprising many, San Jose (CA) is also on the recession proof city list due to the strength of the Silicon Valley economy. However Forbes offered the following note of caution regarding San Jose.

And in the San Jose area, the median home sale price is over $830,000. That's 11% higher than it was in the fourth quarter of 2006, helping to land the area at No. 4 on our list. Problem is, that growth has since cooled, and it remains to be seen whether pricey homes coupled with a 5.3% unemployment rate will cause trouble for homeowners this year.

Conflicts entangle Auction Rate Market

“Safe as cash,” proclaimed the brokers as they sold billions of auction rate securities to investors. Now the market is locked up. Both investors and issuers have taken a big hit.

Have the investment bankers felt any pain? No! In fact they still make out like bandits even as the market refuses to thaw. Any way you slice it, the end game in the auction rate market for Wall Street firms is “heads I win, tails you lose.”

The entire market is rife with conflicts of interest. First the investment bankers marketed the securities as safe as cash in their own internal auction market and refuse to step in to keep the market liquid as over 70% of the weekly auctions fail. The Wall Street firms are still paid for their “services”, even though no securities are sold. Furthermore the bankers make big money when issuers directly redeem the auction rate notes.

To pour more pain on the fire, the investment bankers for the most part refuse to allow the notes to trade on a secondary market and demand that the auction rate securities be marked to face value. The places issuers in a situation where they can not buy back their own securities at a discount, at a time no investors will purchase them for face value. Of course, a wholesale discounted market would force the Wall Street firms to mark down similar securities on their own books; leading to billions more in losses.

At some point, local and state governments are going to demand action to fix this situation, and refuse to be held hostage by the Wall Street firms. The first step is to demand a transparent auction market where these securities can be sold for a discount or premium from face value. This is the only way to unfreeze the auction rate market and restore investor confidence.

A proper stand: Canada will not bail out Investment Banks

The governor of the Bank of Canada says he will take a tough stand with financial institutions that wind up near bankruptcy because of poor decisions.

Maybe it is time that the United States adopted this policy. Mark Carney says the central bank won't bail out Canadian financial institutions like the U.S. government did when the Bear Stearns brokerage, one of the giants of Wall Street, ran afoul of the subprime mortgage mess.

The absurdity of the U.S. Federal Reserve bailing out Bear Stearns simply to avoid a short term financial panic in the credit market is becoming more apparent as further details are being revealed about the situation. The action will only drive more bail-out calls. It teaches a lesson to Wall Street that firms can privatize the gains, and socialize the losses. There is no reason to adopt any type of reasonable risk control if the government will be available to bail out the investment banks every time the bad decisions come home to roost. This will only drive the investment banks to maximize revenue by taking more risk.

The most current variant of the Fed’s flawed policy is opening the discount window to the investment banks in the past few weeks; in the past this lending facility was reserved for commercial banks. The Wall Street banks have been hitting up window for over $38 billion per day far more than all the commercial banks in the U.S. combined. To think that some congressmen squawked and demanded an investigation when Countrywide Financial was provided with $50 billion over several months; these legislators are strangely silent on Wall Street hitting up the Fed for nearly the same amount each day.

Even more shocking is what the Wall Street is doing with the borrowed money. The intent of the Fed action is to inject liquidity into the system in order to ease the credit markets. The Investment Banks have been happily utilizing the low cost Federal loans as capital to fund large scale gambling. The major Wall Street institutions have used the Fed cash to implement international interest-rate “carry trades” with the intent of squeezing profit out of the market. This naturally will lead to hefty bonuses for the Wall Street staff; assuming the positions don’t implode over the coming months. No concern is given to loosening the stranglehold of tightening U.S. loan conditions or unwinding the derivatives that sparked the credit crisis.

If Wall Street is not using the discount window cash for its intended purpose of easing the credit markets then the spigot should firmly be shut off. The Bank of Canada has the right mind-set when it comes to dealing with investment banks – these risk-driven firms should be responsible for their own calamities.

Bring back Glass Steagall

The Great Depression brought about many needed regulatory reforms. These acts served to curb excess speculation, and to keep the funds of bank depositors safe. One of the primary reasons for the insolvency of many commercial banks in the 1930s was the loaning of money for stock market speculation in a market that allowed absurd levels of leverage. Many of these banks owned brokerage security operations, and found an easy path to executive riches by pressing these loans on depositors prior the 1929 crash.

The Glass-Steagall Act tamed this circus by prohibiting banks from owning financial companies. This created a wall that stopped the ridiculous activities of banks that were not in the best interest of customers. Coupled with the creation of the FDIC and other reforms included in the act, the Glass-Steagall legislation protected both bank account customers and investors. The act prohibited a commercial bank from offering investment and insurance services while maintaining better regulatory scrutiny on capital ratios.

Unfortunately, the provisions that separated cross-ownership were over-turned by the Gramm-Leach-Bliley Act of 1999. Financial companies spent more than $300 million in lobbying over 20 years in their attempts to repeal Glass-Steagall.

Not merely content to simply mine the riches offered by the combination of insurance underwriting, securities underwriting, and commercial banking; Wall Street championed unregulated derivatives. The securities industry claimed that these contracts would distribute risk and regulating derivatives would impede economic development. Supported by the Federal Reserve the merged financial industry drove the wide-scale introduction of derivatives into traditional commercial banking markets such as mortgages.

Since 1999, the derivatives have grown on a parabolic curve. There are now over $516 trillion in derivatives outstanding.

In a short eight years, the rapid proliferation of derivative contracts has become the Trojan horse that is likely to undermine the entire modern banking system. The collapse of Bear Stearns should act as a warning for the entire financial market. It is time for regulators to step in and properly unwind the most troubled instruments, while providing concrete oversight to the entire derivatives industry. Obviously the lunatics have been found unfit to run the derivative financial asylum. Deregulation has run amok, and financial checks and balances must be restored to protect the economies of major nations.

Investment banks’ culture of risk is diametrically opposed to the purpose of commercial savings banks which is the preservation of customers’ assets. The introduction of derivatives as the primary under-pinning for the mortgage industry with little regulatory oversight was an event that was obviously going to end in a calamity; similar to giving liquor and a car to a chronic drunk.

The continuous reduction of the protections of Glass-Steagall, by politicians in Washington driven by banking PAC money, is the root cause of the current painful credit crunch which is undermining the entire U.S. economy. In order to fix the core problems, the protections created by Glass-Steagall after the harsh lessons of the Great Depression must be restored by Congress. A clear separation of commercial and investment banking must be reestablished.

A recent PBS Frontline outlined The Long Demise of Glass-Steagall.

Home Prices: Down 13.3%

In case anyone is not a believer, the statistics firmly demonstrate that home prices not only go up. They can also go down – sharply – in short periods of time. The median price of a home sold in March dropped 13.3 percent when compared to one year ago. This is one of the largest declines ever, exceeding even the 14.4 percent drop in July 1970 when the U.S. was buried under high interest rates and stagflation.

The sales of new homes in March dropped to the lowest level in 16 ½ years, the slowest pace since 1991. The early part of the 90s was not merely memorable for outlandish music videos on MTV but for the S&L crisis that left many sub-divisions incomplete and housing market in absolute chaos. Having a housing market with lower sales then one of the worst real estate periods in recent memory can not be considered a positive sign. Not even NAR (National Association of Realtors) could spin this as good news.

New home sales plunge to lowest level in 16 1/2 years
New home sales plunge to lowest level in 16 1/2 years, prices drop by largest amount in 38 years

Will Congress pay off Credit Card debt next?

In a shocking surprise, all of those people who could not pay-off their mortgages are also having problems with their credit card bills. Late payments on consumer loans have reached 16 year highs. This does not bode well for the financial sector.

There are now a slew of plans being put forward by Washington to bail out homeowners struggling with their mortgage payments. Most of these plans reward brainless homeowners for taking risky loans, buying at the peak of the market, purchasing more home than they could afford, and not having any financial discipline. Of course, the smart homeowners who only purchased what they could afford within traditional lending ratios and used common-sense are the suckers in the proposed Washington plans. The majority of these hard-working homeowners will be paying for this bail-out via higher taxes and bank fees for a long period of time.

The concept that the loan values for under-water home owners will be set to 90% of the current house value, and the loss to the existing loans be taken by the banks and tax-payers is obscene. Especially when the government (meaning the taxpayer) will be on the hook for any of the new loans that still default. While Congress is at it -- why don't they just pay off all the late credit card debt, surely this will be a popular earmark attached to some bill.

Socialize Loss, Privatize Gain – Welcome the new Wall Street motto

On the other hand, now that the Fed has seen it fit to socialize investment banking losses by allowing trading firms to borrow at the discount window, and bailing-out Wall Street institutions; most of main-street America sees nothing wrong with bailing out homeowners directly for their poor decision making to the tune of 400 billion dollars in government loan guarantees. The axioms that currently apply to Wall Street should equally pertain to the individual consumer according to most sentiment surveys.

The discount borrowing by investment companies from the Federal Reserve ‘Discount Window’ reached $38.1 billion in daily borrowing this week; much greater than $7 billion averaged by standard banks. Rather than using these funds to improve liquidity in the credit sector, most of these firms appear to be using the borrowed funds to implement more risky carry strategies to make money. Someone at the Fed needs to close the barn door. The intent of the Fed program was to ease a potential liquidity crisis; in reality the action is expanding the bubble. The Fed should have placed more conditions on these loans when it agreed, for the first time, to let big investment houses temporarily get emergency loans directly from the central bank.

Thanks to Washington, it appears that there is no longer any punishment for poor business practices. No harsh (and proper) lesson will be learned by either the financial markets or individual homeowners about risk control or avoiding excess greed. A significant educational opportunity is being missed, and unfortunately it badly needs to be taught. The recent actions by the government will only increase risky behavior by institutions and consumers in the future.

Triangle Housing Update

When driving around town, the pull-back in the Triangle real estate market is obvious to the casual observer. Houses sit on the market for many months and are still not sold. Land that developers planned to use for the next state of sub-divisions suddenly has large for-sale placards. Some developments have come to a screeching halt with no further construction

Most of the builders and real estate agents are absolutely glum about the local prospects. Many are fleeing to pursue other career opportunities.

Still the local real-estate organizations cheerlead, publicizing that the Triangle market is better off than other regions. Considering the state of real estate nationally, this is merely the equivalent of stating that being trampled by a wildebeest is preferable to being squashed by a hippo.

An N&O article today outlined that sales of the Triangle's existing homes fell for the eighth consecutive month in February. The local foreclosure rate has sky-rocketed while unemployment is now at 5%. Despite over 40,000 people coming to the region each year, most of the new-comers have not been able to unload their existing homes in other markets.

Despite the rise in inventory and drop in sales, the average price has managed to rise 3.1% from a year ago. Despite the attempts of the real estate industry to tout this, the news is actually dismal. Each month the average price rise decreases; shortly the figures will turn negative based on any type of statistical evaluation.

Local realtors are hoping for a strong spring/summer selling season, any type of evaluation of the market over time demonstrates that it is likely that their hopes will be crushed. There are no meaningful figures that indicate the local real estate market will improve during 2008. While the Triangle may not be as negatively impacted as other speculative markets, by no means is the region immune from real estate downside.

Sales of Triangle homes off again

Quick Takes: Rising Taxes, Home Equity Crisis

Many people hold the misguided belief that their taxes will go down during a recession. If everyone is spending less then won’t the government need less? Unfortunately it never works out like this. During recessionary periods, government spending is normally in crisis as sales and income tax revenues drop, this leads to outsized tax increases to support rising spending as social program needs increase. The longer a recession lasts, the higher taxes tend to get.

MarketWatch outlines 9 reasons your taxes are going up. Facing a huge national debt load, it is unlikely that taxes will retreat. Irrespective of which party is in office, the entire situation will result in taxes being raised. There is no other possible real alternative to dig out from under the mountain of debt at the federal, state, and local levels of government – except for tax increases. (Nobody should be so naïve to believe that government spending will drop).

Taxes are not the only problem for consumers. The credit crisis is about to fold over to another sector, home equity loans are under pressure. Americans owe over $1.1 trillion on home equity loans. Many of these loans were unwritten during the bubble period with lax standards. Many home equity loans did not require income verification or were combined in “piggy-backing” deals for no cash down. All the questionable practices over the past few years in the mortgage market equally apply to the home equity loan sector.

A good portion of these home equity funds will not be repaid to the lending institutions. Especially in markets where housing prices have dropped significantly, second-lien holders are being left with nothing in short sale scenarios. The percentage of delinquent home equity loans was up to 5.7 percent in December, the figure is expected to be over 7% by the end of March.

Equity Loans as Next Round in Credit Crisis

Consumer Confidence Expectations hits the lowest level since 1973

The Consumer Confidence Expectations measure by the Conference Board dropped to 47.9 from 58.0. This is the lowest reading since 1973. Many will remember that 1974 was a very painful downside year for the U.S economy.

Consumer confidence crumpling proclaims the headlines in many papers across the U.S. today. The commentary from analysts adds a sense of despair to most of the press.

"Yes, weaker than in the last four downturns," BMO Capital Markets analyst Sal Guatieri said of the latest expectations number. "Ouch!"

Consumer confidence, he said, is "now buried deep in recession territory" and it is now "only a matter of time before personal consumption follows suit."

Of all the headwinds facing the economy -- faltering consumer confidence, which will drive a drop in retail sales representing two-thirds of the overall economy, is the largest threat. This has driven the federal government to take tax rebate measures to boost the consumer. However in an environment with a credit crunch, falling home prices, rising unemployment, high fuel prices, and increasing necessity costs --- it is not likely the government action can stop the downward spiral.

Quick Takes: Credit Churn, Bear Stearns

The failure of auction rate securities is still causing angst for the closed end bond funds. The leveraged funds that issue auction rate preferred shares are in serious trouble.

BlackRock and others in this business are searching for strategic alternatives. Over $300 billion in securities are at risk, and BlackRock has 66 impacted bond funds with a value of $9.8 billion.

Despite proposals for re-financing and put features for these instruments, the probability of a resolution appears bleak. By the end of the auction rate failure crunch, there is an expectation that one or more of these fund families will flounder. Most likely the backing company will be sold for pennies on the dollar.

The news is not any better in the subprime sector, the delinquencies on the mortgages issued between 2005 and 2007 continue to rise according to Standard & Poors. The delinquency rate is rapidly approaching 40% for many of the notes issued in these years; the rate of delinquency is jumping 4 to 10% per month. Wall Street expected a delinquency rate of 15% worse case when it packaged the notes in CDOs; so much for financial modeling.

In other news, you don’t have to feel bad for all those executives at Bear Stearns; many of the top insiders sold large chunks of stock in December in advance of the implosion. It appears that these folks will not have to move out of their multi-million dollar mansions.

In related news that will cheer up Bear Stearns employees, JP Morgan raised its bid to purchase the bank to $10 from $2. The question being if Bear’s chairman James Cayne who is probably off-site at either a bridge tournament or the golf course has heard this news yet.

Are Bailouts only for Wall Street?

In an era where the government is spending billions of dollars to bail out Wall Street institutions, Dwayne Powell of the News & Observer gets right to the heart of the matter with a simple cartoon.

As outlined in The Great Mortgage Industry Heist, the creation of billions in liquidity for bank bailouts by the Fed acts as a burden on the entire U.S. population. Consumers see the results every day in rising food costs, soaring gas prices, and increasing local tax burden.

The Great Mortgage Industry Heist

Each evening newscast brings the latest fall-out of the mortgage industry bubble; the credit failures on Wall Street, “sub-prime” as the word of the year in 2007, job losses in the financial and construction industry… the coverage is regularly the lead story. As local homes sit on the market for months and neighbors search for jobs, the crisis appears closer but not directly in our wallets.

The credit crisis triggered by the sub-prime lending caused the Fed to quickly reduce rates and inject huge amounts of cash into the banking system in an attempt to alleviate the financial liquidity issues. An increased money supply makes the cash a consumer holds worth less -- a classic definition of inflation. Reminiscent of Germany printing currency after World War I until a loaf of bread cost millions of deuchmarks. Overall the U.S. government action has led to increased inflation, a falling dollar, and spiraling commodity costs; all in support of bailing out an industry that created its own problems due to its insatiability for riches.

Of course, mortgage executives and Wall Street deal makers are not feeling any pain. Lax lending standards allowed everyone to profit at every level of the food chain. The entire mortgage industry was focused on greed rather than proper lending standards. This includes every level within the mortgage industry from the broker who placed homeowners into improper loans for increased fees to the Wall Street bank executives whose firms packaged up junk mortgage paper and painted lipstick on these CDO pigs as triple-A investments. No thought to proper risk control was given; the entire industry was driven by a voracious hunger for money.

Countrywide Financial Corp. chairman and chief executive officer Angelo Mozilo, former Merrill Lynch CEO E. Stanley O’Neal and Charles Prince, former chairman and CEO of Citigroup, have all been in front of Congress attempting to explain why their multi-hundred million compensation packages were justified while their companies went down the flusher. Certainly the Wall Street bonus machine felt little pain.

In the end, who is holding the bag? Many would state that it is the main street consumer. A number of people may not think that these events impact their pockets; however this is no longer true. Every time a consumer fills up their tank or goes to the local grocery store they are paying the price for the greed of the mortgage industry. Welcome to the Great Mortgage Industry Heist – the greed that placed money in the pockets of a few impacting everybody.

The credit crisis, triggered by the sub-prime fiasco, has driven an inflationary economy with prices for most necessities spiraling at nearly unprecedented rates. Not only are the prices increasing but the associated total taxes being paid on necessities is rising – regressively impacting those who can afford it the least.

Consumers dropping by their local grocery don’t only encounter rising prices for milk, bread, and other basics – as prices increase the total collected sales tax on the necessities rises. While from a county level the total sales tax collected may be offset by the drop in consumer spending on non-necessity items such as clothes, electronics and other items as consumers are more stressed --- the staples needed to live are in the increased collections column.

The situation is no different at the pump, as fuel costs increase the associated gas tax in many states rise, making the commute to work more expensive.

Rising inflation due to action by the government and its agencies can in itself be viewed as a tax on the entire population. Certainly there is an option to let these institutions fail instead of extending liquidity by printing money and lowering rates, but for some reason this is viewed as a worse alternative than effectively taxing the entire population for the greed-driven decisions of the financial industry. “Too Big to Fail” can regularly be seen in print as government decision makers defend their actions to bail out larger banks.

Is it simply a choice between a deflationary depression and an inflationary recession? Government policy can drive either alternative. Either allow the market to wash out the excesses without interference or continually bail-out institutions. A good case can be made that the Great Depression would have lasted a much shorter period of time if the government had allowed the financial markets to run their course.

The sub-prime bubble will act as the historical example of a greed-driven institutional credit balloon which overwhelmed banks and governments. The contagion to other credit markets will drive required systemic reforms in risk management while placing many Wall Street quantitative models into the historic dust bin.
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An excellent overview of the bursting of the Mortgage Bubble can be found at:
http://www.blownmortgage.com/files/presentation3-2008.pdf

The 75 page power-point presentation, put together by T2 Partners LCC, includes many graphs and provides first-rate set of fact & figures about the situation, and demonstrates why the implosion is still in the early innings.