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Originally Posted by LegendaryLars
I thinkwe are going to ahve a banking crisis when all the no money down folks just walk away from their negative equity. banks sell and the selling begets selling.. it could be very very ugly
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you're assuming the banks are holding those mortgages. they don't. Fannie Mae and Freddie Mac hold most mortgages. they repackage all the interest and principle payments people send them into bonds - bonds that are held by many retirement / pension portfolios. not to mention, there's some sort of agreement that the u.s. treasury will bail these two out of they get into trouble. they hold almost 2 trillion dollars in debt - not to mention the many many trillions of off book derivatives they wouldn't be able to service either. it would sink our economy - and the global economy.