By Sam Sherrill, Deputy Editor, Crow's, RISI
SAN FRANCISCO, Oct. 13, 2008 - Words of prophecy are seldom well received, primarily because they so often go against popular sentiment. It is better to cling to a ragged hope, however futile it might seem, than to face a bitter reality.
Denial being ingrained in most humans' thinking, it sometimes takes an extended and costly period of recovery to make the adjustments necessary to restore health.
Perhaps that is why such prophetic words as those written by Steven Holmes, in September 1999, were largely disregarded by decision-makers on all levels of the economic structure. Holmes foresaw, with unerring accuracy, the underlying weakness of expanded mortgage practices. President Clinton disregarded them, because he wanted more people to own homes. Bankers and mortgage lenders disregarded them, because they wanted a broader demographic spectrum to be represented in lending practices. Fannie Mae shareholders disregarded them, because they wanted more money, more profits, more, more.
Thus, the mortgage-lending practices of the country were opened to a largely unregulated environment, in which creative machinations were given full play. Subprime, anytime. Bring on the boodle, baby, let it pour. It was a grand and dangerous party, while it lasted, and like most revels it led to a great deal of pain.
Mortgage bankers, bruised and battered, some of them barely alive, crawled from Wall Street to Washington, seeking relief. It came in the form of a monumental bailout, cast at the feet of a resentful populace, which was itself shaking its head and wondering what had happened to its 401K's. Shackled both emotionally and financially, the American public saw no champagne, but heard only popping bubbles as company after company vaporized in the heat of extended credit losses and the pressure of tightened bank lending that prevented them from getting adequate operating capital.
This is an excerpt of a story that appears in Crow's Weekly Market Report, the longest-running source of pricing and market reports for the North American lumber and panel industry.
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