Saturday, August 16, 2008

"Dr. Doom"

Tomorrow's New York Times Magazine features an article by Stephen Mihm about NYU economist and author Nouriel Roubini, "Dr. Doom". On the real estate/mortgage bust, Roubini tells Mihm,

“You either nationalize the banks or you nationalize the mortgages,” he said. “Otherwise, they’re all toast.”

That seems a little hyperbolic. In a recent post ("America's Smartest Banker") we mentioned a few local banks that seem to have weathered the credit crunch fine, and are still making mortgage loans. Surely there are other local banks around the country that have been prudently run as well. In another recent post ("Profiting from the Credit Crunch/Real Estate Bust") we noted entrepreneurs in nearly opposite corners of the country making money by buying distressed mortgages. Why won't this sort of approach -- expanded as more seek profits in distressed mortgages -- eventually mop up most of the mortgage mess? Granted, when the dust settles, mortgages won't be as widely available as they were before to those with poor credit or those unable to make down payments, but a return to more rational lending standards will be a good thing for the financial system and the country as a whole.

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