Americans On The Verge Of An Economic Disaster/More On The Sub Prime Mortgage Fallout

With the recent near collapse of Bear Stearns, ten percent of the US population already relying on food stamps to survive, 80,000 U.S. jobs lost in the month of March 2008, and a precedent setting recession now looming over the American people, America as a nation is on the precipice of an economic disaster.
Apr 4, 12:59 PM (ET)

By JEANNINE AVERSA


WASHINGTON (AP) - Employers buffeted by talk of recession slashed 80,000 jobs in March, the most in five years and the third straight month of losses.

At the same time, the national unemployment rate rose from 4.8 percent to 5.1 percent, the clearest signal yet that the economy might already be shrinking.

The new snapshot of the job market, released by the Labor Department Friday, underscored the damage that a trio of crises _in the housing, credit and financial sectors - has inflicted on companies, jobseekers and the economy as a whole.

See the rest of the story here:

http://apnews.myway.com//article/20080404/D8VR5U6O0.html


"Subprime mortgage collapse: why Bear Stearns is just the start"

"Update, March 2008: see A rescue for Bear Stearns, but the Fed is destroying the dollar -- For more on the crisis affecting Bear Stearns and its sale to JP Morgan Chase:

This is not the idle chatter of permanent bears. The subprime mortgage collapse now hitting Bear Stearns may be just the start.

Serious analysts from big investment firms are talking ominously about 'the big one' It will make you angry to learn just how the investment industry has got you involved.

If you can understand what's happening, you should have time to move. So let's get to the bottom of it now, and in plain English.


From subprime mortgage to MBS

It all starts with the mortgage. About six million people in the United States who have no money have borrowed about 100% of the value of a house, right at the top of a housing market which has since fallen sharply. These are the subprime borrowers.

The lenders, however, did not have to worry very much about the risk of default, because they rolled these mortgages into bonds called Mortgage-Backed Securities, which they then sold. They got to be off-risk within a few weeks, because by then these re-packaged mortgages belonged to other financial organizations.

But it is not always easy to sell a package of these Mortgage-Backed Securities (known as MBS for short). Selling such a product demands that the credit quality is assessed; and because the underlying mortgages are subprime they are quite likely to go into default.

So a credit-ratings agency will only give the subprime MBS a low credit score, which means it is not considered investment grade. That disqualifies it from the portfolios of many professionally managed funds."

See the rest of the article here:

http://tinyurl.com/38lf65