Credit Rebound?

I began my blog by describing how our housing and securities markets were interacting with each other in ways that might turn out to be disastrous. It should be noted that adjustable mortgage resets peak in February 2008 at $52 Billion. With the Fed lowering rates, one should hope that the adjustable rate loans can be refinance into fixed rate loans like 2001-2005. Unfortunately, risks have been repriced in the market and spreads have widened to compensate for the credit risk of the borrower. That means mortgages are between 6.5%-10% depending on credit. This widening of interest rates has spread to the banking segment of our economy. There are $750 Billion of M&A loans that need to be securitized along with all the real estate loans that haven't been able to come to market. This backlog needs to be worked off before Wall St. starts to make new loans. These credit problems seem to arise mid-economic cycle as the economy slows down a bit. For the last 30 years, the Central Bank and Fed have done whatever it takes to get the markets moving again and this time is no different. It might take some time and new ideas but we can fix the credit situation. I hope it comes in the form of a coordination among Central Banks but you never know how Geopolitics will play into our economic problem.