When You Hear “Risk is Contained,” …Run

Do you remember this?

On May 17, 2007 Federal Reserve Chairman, Benjamin Bernanke, was questioned about the risks showing up in the subprime mortgage market.  His response: “We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

Then came 2008 and the rest, as they say, is history.

Now, just when you thought it was safe to go back into the water the Financial Times published an article “US Subprime Mortgage Bonds are Back in Fashion.”

The article states that people with credit scores (FICO) as low as 500 are, once again, able to obtain mortgages.  The mortgages are packaged and sold as “subprime” (risky).  And amazingly the demand for them is off the charts.

The rating agency S&P (who willfully looked the other way at subprime mortgages in 2008) is quoted (by a Mr. Saha) in the Times article as saying “The risk is contained, in our view,” 

In Plain English, what that means is “The risk is contained…in tax payer bailouts.”

(Side note:  Didn’t officials in Japan say “The risk is contained” about the awful melt-down of the Fukushima nuclear plant?)

You realize, I hope, that when these bonds blow up again, the boyz will lobby DC to get us taxpayers to cover their losses.  That’s when things will get really ugly.

Don’t get caught off guard like 2008.

Learn how to read between the lines and connect the dots so you can side step this oncoming freight train HERE.

You’ll thank us later.