There have been so MANY voices warning about this unfolding crisis. You have to ask yourself, how could we let it happen? The history books will be trying to make sense of this train wreck for a long time.

We must hold those accountable, accountable. They will be trying to pin the blame on others (including those who short stocks) and looking for bogeymen.

These are just a FEW quotes from knowledgeble persons back in 2006 -

Texas Congressman Ron Paul
"If there were a 'housing hurricane,' it would be just like a real hurricane. You spend whatever people demand you spend and worry about it later. FANNIE MAE and FREDDIE MAC have a line of credit from the Treasury, and they would use it if they had to. And I'm sure other mortgage companies would qualify. Congress would do whatever they feel they have to do…There is no historical example where paper money has lasted for a long period of time. It works for a while until the trust in that money is totally undermined, and then it ends up in an economic calamity, for the most part, in runaway inflation or other serious dislocations."

[This is why I believe in commodities and would rather see Windfall developed by NOT]

Paul McCulley, PIMCO
"The end of the housing boom will come soon, we think, and when it does, sales volume in the property market will reverse wickedly. Housing prices don't crash, but volume of transactions does, as sellers refuse to face reality on pricing and buyers wait them out."

[I have seen this locally. A house nearby which I almost bought for investment, eventually sold at the too high a price of $325,000. That was two years ago. It is now back on the market for $410,000.00. What are the sellers' thinking?]

Paul Kasriel, Northern Trust Company
"Again, so what if mortgage defaults are on the rise? No biggie except that U.S. commercial banks have a record exposure to the mortgage market. About 62% of bank earning assets are mortgage-related. (I do not have access to the data to determine what part of this mortgage exposure pertains to commercial properties). What I'm driving at here is the potential for a bust in housing to cripple the banking system. History tells us that a crippled banking system renders central banks less potent in combating economic downturns and promoting robust recoveries. In other words, if a housing bust led to large credit losses to the banking system, Chairman Bernanke could cut the fed funds rate to 1% and be surprised that a low interest rate did not have the same magic for him as it had for his predecessor."

[It is interesting that the FED has not yet touched the interest rate lever. Maybe its because they are afraid what will happen if they lower it and it doesn't help?]

Interesting times to be alive!

BK