A Jumbo Headache

The ratings agencies, who had absolutely no clue with regard to the mortgage backed securities which have played a major role in this housing crisis, today lowered the ratings on jumbo loans from a period before the mortgage fire really began burning.

Please take a listen as David Faber of CNBC explains:



As Faber indicates, this goes straight to the level of unemployment, which is much worse than the numbers indicate.

If you think in terms of a roller coaster, the sub-prime borrowers have already been to the top and have now emerged on the other side of the valley. Mid range borrowers are in the valley and the high end borrowers, saddled with job losses and coupled with a severe contraction of credit options and a reduction in revenues and profits associated with their employer, are bolting into the valley.

Unfortunately, this housing crisis would be behind us if not for implemented policies by the government which handicap any expansion of the economy. Excessive new regulation and taxes are a major problem, but the uncertainty of potential increases in these areas, read Cap & Trade and Health Care Insurance Reform, virtually prohibit employers from expanding their payroll. In addition, a value added tax is being discussed.

Consumers, who cannot borrow to escape the financial constraints they are mired in and are scared about the potential of their employment being eliminated, have drastically cut back on spending. This is crushing many industries, including retail, where lower level workers are prevalent. And, if you can believe it, the minimum wage is set to be raised, which will further reduce employment in lower income positions.

Virtually every position the Obama administration has taken has been the wrong one, and a second stimulus package that is being discussed, is certain to follow on the heels of the first one, as a colossal failure. The economy is certain to remain shackled with excessive regulation and taxation in place. Until the government gets out of the way of small business, limits regulation and taxation and allows the free market to function properly, GDP, and thus prosperity, will be declining.

Call your Congressman and Senator today!