At the heart of the Mortgage Crisis

Below is a dialogue that I had earlier with a friend. We had been discussing television, specifically late night infomercials, when the subject turned:

DH: What I find interesting are commercials for refinancing your house through Countrywide followed by commercials for credit counseling and debt management on the Cartoon Network in the middle of the day.

Me: Yeah, synergistic advertising. It half makes you believe in conspiracies, doesn't it?

DH: It has a certain logic to it, I suppose, and my four year old has a very good idea of how a mortgage works now. The other day she wanted to refinance the house so we could get cash to buy her toys.

Me: What's gotten so many people into the pickle that they're in is that they had the same outlook as your four year old.

DH: No doubt.

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China's mortgage market: the Other Shoe?

From Paul Kedrosky's Infectious Greed comes this disturbing tidbit:

Paul Kedrosky: China Has a Worse Mortgage Problem Than the U.S.

Here's the some inverted reassurance: One Chinese academic told the South China Morning Post today's' that China's mortgage market is in even worse shape than the U.S. sub-prime market.
Yi Xianrong, a banking and finance expert at the Chinese Academy of Social Sciences, said Chinese banks had been lax as they built up 3 trillion yuan ($396.2 billion) of mortgage lending.Defaults in the U.S. subprime mortgage market now total about $200 billion, on some $1 trillion of loans, according to Credit Suisse."The quality of housing loans are much worse than the subprime loans in the United States," Yi was quoted as saying by the South China Morning Post."At least there has been a credit check system (in the United States) but in China anyone can borrow money to buy a house."

If the Chinese banking industry has the same kind of oversight and controls in place as their manufacturing sector, then they're completely screwed.

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