A quote I came across today…

?”As of the end of the fourth quarter of 2007, 5.82% of all mortgages were delinquent, with fixed and adjustable subprime mortgages running at a 14% and 20% delinquency rate, respectively.”

On an unrelated topic, my previous question of whether or not you should consider credit a form of emergency savings…? you shouldn’t.? From Mish:

Nina writes…? “I?ve always believed that keeping a HELOC readily available is the best insurance policy and the back-up plan for if / when the emergency fund runs empty…”? and then “..we got the letter from Citibank about our $168,000 line of credit: “We have determined that home values in your area, including your home value, have significantly declined. As a result of this decline, your home?s value no longer supports the current credit limit for your home equity line of credit. Therefore, we are reducing the credit limit for your home equity line of credit, effective March 18, 2008, to $10,000.”

Credit can, and in extreme circumstances will be withdrawn.? There is no substitute for cash, and credit is not an emergency fund.

On another topic, BSC (as per the rumors in my last post) is bankrupt.? It has managed to be sold for $1 billion thanks to a NY Fed bailout and the desire to keep the counterparty system from collapsing on itself.

My perspective on the bailout is this…? if you see your neighbor playing with firecrackers in their living room, and you warn them of the dangers…? you feel like you’ve (maybe) done your ethical duty.? But when their house catches on fire, you can’t stand there saying “I told you so…”, you have to grab your garden hose and try to help put out the fire.

The Fed’s parade of obtuse acronyms and abbreviations is their own modern day version of the garden hose.? Will it work?? Time will tell…? but they have to at least try to put out the fire before the whole neighborhood goes up in flames.

Does Bear Stearns (and the rest of Wall Street) deserve to be bailed out?? No, absolutely not.? But their house is on fire, and it blatantly threatens our own houses (society at large), so emergency measures are required.? The time to avoid moral hazard was two or three years ago.

Now I’m pretty much as “free market” as they come…? but I have to say either we don’t have government bailouts, or we regulate those who would receive said bailouts.? If the Fed is going to back-stop Wall Street (which, for all intents and purposes, it has to), regulation is required. ?You can’t have your cake and eat it too — or rather, you shouldn’t have your cake and eat it too.