Word: feds
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...part, that's testimony to the success of those G-men in dark suits. (There are women involved, but they're a distinct minority at Treasury and the Fed; men in light-colored suits are even rarer.) The U.S. government is a far bigger, more activist presence in financial markets than it was in the early 1930s, and this activism has staved off the kind of financial breakdown that sparked the Depression...
...going in the U.S. since the market for private mortgage-backed securities collapsed last summer. They've been able to keep financing mortgages because of the widespread belief that if they faltered, the government would step in to make buyers of their mortgage securities whole. If Paulson and the Fed hadn't stepped in when Fannie and Freddie faltered in early June, the companies might have stopped buying loans and the housing market might have stopped functioning...
...this activism comes at a price. The Fed's rate cuts have fueled inflation and undermined the dollar, now trading at about $1.60 to the euro. The Treasury's willingness to backstop Fannie and Freddie, which together are on the hook for $5.2 trillion in mortgage debt--just slightly less than what the U.S. government owes investors--is already sparking a bit of worry about the soundness of T-bills and bonds. With more bailouts, that worry could snowball...
...bread: the price of flour has tripled in the past year as a result of a surge in global commodity prices. Unpredictable and uncontrollable events such as this may prove much more important than any international policy for the survival of the Afghan state. As Nabi says, "We are fed up with war. I am supporting five unemployed sons. Why can the government not create jobs...
...main such effort has been a voluntary deal announced last December by Treasury Secretary Hank Paulson in which mortgage lenders agreed to freeze interest rates for certain subprime borrowers. But thanks to the Fed, high rates on adjustable-rate loans are no longer the big problem. The big problem is that 9 million U.S. homeowners owe more than their houses are worth; they're upside down, in the parlance, meaning that if foreclosures are to be slowed, the mortgages themselves must shrink...