Finally -- someone is linking the housing/mortgage bubble to the drop in interest rates in response to the collapse of the hedge fund LTCM in 1998. Here too.

Global Property Bust.

Snippet

These holdings add up, on average, to 151% of their core capital of commercial banks involved; in the case of the savings associations, it's 181%. There are actually a number of FDIC-insured institutions which "have very high concentrations of GSE-related securities that amount to more than 500% of their TIER 1 Capital." This means that a 20% plunge of Fannie and Freddie debt titles could wipe out the entire core capital of such banks.

International investors, including not least the Asian central banks, would be hit hard as well. Just as an example, about 30% of the $92 billion in net capital flows into the United States in January 2004 constituted foreign buying of bonds issued by the GSEs.

One big house of cards -- figuratively and literally.

The State Treasurer of Oregon is as blind as a bat. The stupid twit sees the path to security in encumbering our homes to the max to obtain bond proceeds to then cram into overpriced stocks. The Wall Street Aligned Actuaries for public pension systems are fueling the idea that to maintain bond ratings that state and local governments must fully fund public pensions. This, in Economics For Idiots terms, is a wholesale effort by the really big boys to substitute risk capital for nothing more than taxpayer obligations. They will sell their stock to the very same state treasurers who are issuing the bonds, and buy those bonds with the proceeds of their stock sales.

Go read stuff on Robert Rubin and LTCM.