Many of the Publicly Traded Sub-Prime Lenders Got Decimated Today
New Century Financial Corp. (NEW) is getting crushed today, trading down 60% on the NYSE. New Century said it had received waivers for being out of compliance with debt covenants from six of 11 lenders, but deals with others remain uncertain. (Marketwatch)
Fremont General Corp.’s (FMT) plunged after the company said it plans to sell its subprime lending business after it received a proposed cease-and-desist order from the Federal Deposit Insurance Corporation.
Why Is All of This Happening??
It seems that many of the sub-prime banks were so busy trying to cash-in on the housing bubble (and contributing to it) that they forgot that it is their responsibility to maintain some set of standards. They were throwing money at anyone who wanted it, thinking that the bubble wouldn’t end.
Here’s your wake up call!!!
I don’t actually blame these companies as much as I blame the regulators. Like anyone else, these guys were trying to make a buck. If the government was doing its job, we’d have a more stringent set of rules on the books to regulate the industry. Like everyone else, the government was too busy boasting about how strong our economy was as the housing market climbed. As people make more money with their homes, they have more money to spend on other items, and naturally, the economy benefits. They got dizzy with success and forgot about the consumer, as usual.
Sadly, this was just an illusion. Yes, many people made a lot of money in housing over the past few years, but is our economy any stronger because of it? With the Iraq war topping 5.8 billion a month, our national Debt approaching $9 trillion, and an administration that refuses to slow down on spending or to roll back tax cuts (or find other revenue sources), our economy is not in a good place. There are a lot of people out there who can’t afford the homes they live in. Foreclosures are rampant across the country. Health care is climbing faster then college tuition (it might be the other way around), and the middle class is suffering along with anyone who is not rich.
We now rely on foreign investment to support our economy. “Now, approximately half of this country’s debt is held outside the United States, primarily by China, Japan and Southeast Asian nations.” (MSN)
How long can it last??
Is anyone going to step up and do something?