Bailout Nation: Freddie, Fannie, and more

[BryanS]

Bryan, it's got nothing to do with accurately valued real estate. It's an expensive hot potato game, and nothing more.

It has everything to do with a fat juicy capital injection so that the ibanks can re-invest in the same bad paper all over again. Houses will not become more affordable as a result of this. Credit might loosen, but values will stay artificially high.

It is the most jaw dropping swindle I have ever heard of, and I work for the apparatus, for pete's sake. The fact that The Administration is handling this the same way (cramming it through congress) that they did the Iraq War should give everyone pause.

Excellent post.

Markets hate uncertainty.

And we are about to engage in a "hot potato game, and nothing more"?! That will calm a lot of investor's fears (and ensuing panic attacks).

I just can't get Toonces out of my mind. "Toonces! Look out!" and then over the cliff we go... Thanks Paulson/Bernake/Bush!

[BryanS]

California has a higher replacement cost than Texas, and that's the true price floor. There really are supposed to be vast differences in housing prices. I don't know what the right number is, but it is lower than it is today...but still much higher than it is here.

I would not say vast difference, but maybe slight differences, in replacement cost. When I was in Maui... milk was $excessive/gallon, gas was $1/gallon more than CA... but when I went to Home Depot... surprisingly, a 4x8 sheet of plywood was in line with what you would expect for Texas. The raw material was not excessively more expensive than Texas (to my surprise). In CA, you have much of the same illegal/cheap labor... so replacement cost on a house (of the same type of construction) is/should be pretty much constant across the US, on average. Northeast may be more expensive, if all you have are Bob Villa/New Yankee Workshop labor types vs. illegal/cheap labor of the south. Just the LAND (over valued!) is so much more...

Problem is... in order to LIVE... you need a house on the land. And the total cost those two components cannot be out of line with income. People have to be able to afford it. If the median income is 100k/year... for a particular CA zip code... then housing in that zip code should be no more than 300K/house - on avg. Doesn't matter that its CA (or anywhere else)... what matters is the income for people that live there, who own their home.

[TheNiche]

OMG, Niche, the claim of 'catastrophic panic' is hyperbolic BS and you know it!

You know this means you are forever barred from marketing and PR in the business.

It may be redundant, but I have never heard of a panic that was not catastrophic. I'm not saying that it'll result in amageddon, but a run on banks is very very bad news.

[TheNiche]

I would not say vast difference, but maybe slight differences, in replacement cost. When I was in Maui... milk was $excessive/gallon, gas was $1/gallon more than CA... but when I went to Home Depot... surprisingly, a 4x8 sheet of plywood was in line with what you would expect for Texas. The raw material was not excessively more expensive than Texas (to my surprise). In CA, you have much of the same illegal/cheap labor... so replacement cost on a house (of the same type of construction) is/should be pretty much constant across the US, on average. Northeast may be more expensive, if all you have are Bob Villa/New Yankee Workshop labor types vs. illegal/cheap labor of the south. Just the LAND (over valued!) is so much more...

Problem is... in order to LIVE... you need a house on the land. And the total cost those two components cannot be out of line with income. People have to be able to afford it. If the median income is 100k/year... for a particular CA zip code... then housing in that zip code should be no more than 300K/house - on avg. Doesn't matter that its CA (or anywhere else)... what matters is the income for people that live there, who own their home.

Replacement cost probably was not the best phrase because it is also used as a technical term in the insurance industry. You're right that if a house burns down, it can be rebuilt for only slightly more than the cost would be here in Texas (California has to deal with union labor in some areas and also has stricter building codes). But the cost to add new housing is much higher because you have to factor in the risks and costs incurred during the entitlement process. For instance, I won't do any business there because 1) their legal system is very complicated and you need specialized lawyers, 2) they have numerous impact fees, 3) getting permits requires such strict concessions in some places that neighbors have been known to successfully demand certain kinds of faucets or countertops, 4) developers are required to allocate some number of homes as affordable housing, 5) NIMBYs and environmentalists are a constant pain in the ass, and 6) getting past all the obsticales often requires disingenuous interactions with local government. In short, the odds that a deal that pencils out on paper will actually get built are very small, and in order for the deal to remain enticing, the profit margins of those that are successful must be commensurately high. A rule of thumb TX to CA comparison for commercial properties is that the margins should be about four times higher in order for the project to be considered feasible. The consumer ultimately bears the burden.

Problem is... in order to LIVE... you need a house on the land. And the total cost those two components cannot be out of line with income. People have to be able to afford it. If the median income is 100k/year... for a particular CA zip code... then housing in that zip code should be no more than 300K/house - on avg. Doesn't matter that its CA (or anywhere else)... what matters is the income for people that live there, who own their home.

If California were a closed system, you'd be right. But its not. People can and do move to Phoenix, Las Vegas, and Texas because those are places where they can afford to live. California's migration and employment patterns are abysmal.

[RedScare]

Replacement cost probably was not the best phrase because it is also used as a technical term in the insurance industry. You're right that if a house burns down, it can be rebuilt for only slightly more than the cost would be here in Texas (California has to deal with union labor in some areas and also has stricter building codes). But the cost to add new housing is much higher because you have to factor in the risks and costs incurred during the entitlement process. For instance, I won't do any business there because 1) their legal system is very complicated and you need specialized lawyers, 2) they have numerous impact fees, 3) getting permits requires such strict concessions in some places that neighbors have been known to successfully demand certain kinds of faucets or countertops, 4) developers are required to allocate some number of homes as affordable housing, 5) NIMBYs and environmentalists are a constant pain in the ass, and 6) getting past all the obsticales often requires disingenuous interactions with local government. In short, the odds that a deal that pencils out on paper will actually get built are very small, and in order for the deal to remain enticing, the profit margins of those that are successful must be commensurately high. A rule of thumb TX to CA comparison for commercial properties is that the margins should be about four times higher in order for the project to be considered feasible. The consumer ultimately bears the burden.

Oh brother! What a typically Texascentric load of crap! Virtually everything you complain about in California also occurs in Texas...maybe not the entire state, but parts of it, just as parts of California are not full of NIMBYs and faucet requirements. Attorney specialization occurs everywhere, including Texas. Theirs laws are the same as ours, based on statute. Most everywhere in Texas is the same as California as far as permitting, the only difference being that they have earthquake codes and we have wind codes.

The reason you don't do business there is that you do not live there, as well as the fact that you are not big enough to expand there. Your attempt to denigrate a state that you do not understand in an attempt to further your deregulation ideology is amusing, though obvious.

[sevfiv]

1.) $700 billion. How are they arriving at this number? Why is it not 600 or 800? Where is Paulson's spreadsheet, where he calculates all of this? Who is in trouble? I want to know. That's the problem we have. Not enough transparency.

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

yay...

http://www.forbes.com/home/2008/09/23/bail...923bailout.html

[TheNiche]

Oh brother! What a typically Texascentric load of crap! Virtually everything you complain about in California also occurs in Texas [not to the same extent] ...maybe not the entire state, but parts of it [such as the parts that it would make sense to do business in], just as parts of California are not full of NIMBYs and faucet requirements [Austin has the most rabid NIMBYs in TX and they're easy to deal with in comparison]. Attorney specialization occurs everywhere, including Texas. Theirs laws are the same as ours, based on statute [but are complicated and/or oddball to an extreme]. Most everywhere in Texas is the same as California as far as permitting, the only difference being that they have [more expensive] earthquake codes and we have [less expensive] wind codes.

The reason you don't do business there is [not] that you do not live there [as is obvious because I do business in adjacent states NV and AZ], as well as the fact that you are not big enough to expand there [because doing business there would require opening a seperate business office...and having to be that large is just another strike against CA]. Your attempt to denigrate a state that you do not understand in an attempt to further your deregulation ideology is amusing, though obvious. [so you're saying that strict zoning, high impact fees, high taxes, rabid NIMBYs, strict codes, union labor, and a far more voluminous code of laws doesn't put California at the slightest competitive disadvantage? Bull.]

[TJones]

Ok, now I am hearing that there may be as much as $1.2 trillion to $1.3 trillion available if need be. Anyone else hear this ?

[N Judah]

Bryan, it's got nothing to do with accurately valued real estate. It's an expensive hot potato game, and nothing more.

Pretty much. Everyone was whipping up tons of credit but had nowhere substantial to invest it. Kudos to them for keeping it going for as long as they could. Ideally we should have provided them with places to dump money for the returns they were looking for. Will we make this mistake again? Getting the ball rolling -anywhere, in some direction- would have been a huge help.

[memebag]

Markets hate uncertainty.

I'm so tired of hearing this. If markets hate uncertainty then markets need to bury their money in the back yard.

What triggered this whole panic? Credit markets have been screwed for a long time, and everything kept limping along. What's different about now?

[N Judah]

I'm so tired of hearing this. If markets hate uncertainty then markets need to bury their money in the back yard.

What triggered this whole panic? Credit markets have been screwed for a long time, and everything kept limping along. What's different about now?

It was mostly based on psychology. People thought housing would go up, and so they bid up housing. But the houses themselves weren't really more valuable or productive.

[BryanS]

Ok, now I am hearing that there may be as much as $1.2 trillion to $1.3 trillion available if need be. Anyone else hear this ?

YES. I've been trying to warn you, for days now... Estimated cost for bad assets could be 1.7 to 2 trillion... on top of what we've already dealt out. The 700B figure is just the down payment. And again, I keep hearing these figures... but I'm not seeing how they are arriving at them...

[TheNiche]

I'm so tired of hearing this. If markets hate uncertainty then markets need to bury their money in the back yard.

Dollars are an investment, too, but with long-term negative returns and rife with currency risk.

What triggered this whole panic? Credit markets have been screwed for a long time, and everything kept limping along. What's different about now?

Big financial institutions, many of them unprotected by the FDIC, are increasingly at risk of going bankrupt in the normal course of doing business, meaning that their depositors would lose everything. But as this risk goes up, even by tiny increments, the rational response for those stakeholders is to withdraw all their assets. Only so many stakeholders can do this before the institution runs out of liquid assets and goes bankrupt. So as the bankruptcy risk is perceived to increase the stakeholders have an incentive to act before everyone else has the opportunity. Even a trickle of panicked people trying to get their money out can scare more rational people into preemptive action because the rational people understand that other rational people understand all the other rational investors' psychology.

So all these people liquidate their assets, and then what? If they don't perceive that the safest investments (money market funds) really are safe, then they try to convert to cash or other liquid non-depreciable assets. But there's only so much cash (M1) out there, so the value of the dollar could spike. If that were to happen, it could cause a catastrophic deflationary event which would really devastate financial markets and tempt the government to print more cash. But doing that has long-term hyperinflationary consequences.

If you think credit markets are screwed up now, you obviously have never studied other international financial crises. The stuff we endured in the RTC days was as nothing as compared to what Japan has gone through, for instance.

[sevfiv]

Lawmakers have reached agreement on a bipartisan counterproposal to the Bush administration's $700 billion financial bailout plan.

Both parties and the House and Senate agreed Thursday to a set of principles on revisions to the rescue plan, which calls for the Treasury Department to buy up bad mortgage securities from banks in an effort to get them to lend again.

The proposal will help homeowners, curb executive pay packages at participating firms and provide oversight of Treasury's actions, said Sen. Christopher Dodd, D-Conn., a key architect of the congressional effort. He did not provide details but said lawmakers will sit down with Treasury officials to discuss it.

"We've reached a fundamental agreement on a set of principles, one, for taxpayers, which is tremendously important," Dodd said. "We're very confident we can act expeditiously."

http://money.cnn.com/2008/09/25/news/econo...sion=2008092513

yawn

[musicman]

yawn

LOL what were you expecting?

[RedScare]

Dollars are an investment, too, but with long-term negative returns and rife with currency risk.

Big financial institutions, many of them unprotected by the FDIC, are increasingly at risk of going bankrupt in the normal course of doing business, meaning that their depositors would lose everything. But as this risk goes up, even by tiny increments, the rational response for those stakeholders is to withdraw all their assets. Only so many stakeholders can do this before the institution runs out of liquid assets and goes bankrupt. So as the bankruptcy risk is perceived to increase the stakeholders have an incentive to act before everyone else has the opportunity. Even a trickle of panicked people trying to get their money out can scare more rational people into preemptive action because the rational people understand that other rational people understand all the other rational investors' psychology.

So all these people liquidate their assets, and then what? If they don't perceive that the safest investments (money market funds) really are safe, then they try to convert to cash or other liquid non-depreciable assets. But there's only so much cash (M1) out there, so the value of the dollar could spike. If that were to happen, it could cause a catastrophic deflationary event which would really devastate financial markets and tempt the government to print more cash. But doing that has long-term hyperinflationary consequences.

If you think credit markets are screwed up now, you obviously have never studied other international financial crises. The stuff we endured in the RTC days was as nothing as compared to what Japan has gone through, for instance.

This sure sounds like a big argument for increased regulation, which calms markets by giving them certainty. What happened to the free market, markets occasionally must correct, Niche that we used to know? Just like Bush and McCain, you now want to socialize the losses of billionaires. I must ask, why should anyone listen to your free market baloney in the future, now that you are a fan of committing theft of my tax dollars (one of your favorite terms) to achieve wealth redistribution (another of your favorites) from the least wealthy taxpayers to the wealthiest? And, since this bailout is intended to help the wealthiest of Americans, and even foreigners, who are heavily invested in these funds, why should the wealthiest Americans not be taxed to pay for it? Why is THIS toll road cheapest for those who use it the most?

[TheNiche]

This sure sounds like a big argument for increased regulation, which calms markets by giving them certainty. What happened to the free market, markets occasionally must correct, Niche that we used to know?

Historically, financial crises are often the medium-term result of changes to the rules, whether moving toward regulation...but especially away from it.

The Scandinavian experience makes an excellent example and has numerous parallels. You really ought to read up on their history. Especially Sweden. They were initially very tightly regulated. There was a limit on how much interest could be paid, either to depositors or to lenders, and as a result there wasn't a lot of money in their system that could be invested. What little investment could be allocated was allocated to very safe investments, basically the no-brainers. This put small and medium-sized companies at tremendous disadvantage and seriously hampered economic growth. It became painfully obvious that they needed to deregulate. And so they did, and in such a way that their system was made more like countries that didn't have either onerous regulation or distressed financial systems. They then had a real estate boom, a systematic banking crisis coupled with currency devaluation, and massive bailout of firms that had been 'too large to fail'. It didn't mean that deregulation was a bad idea. In the long term, they're much better off for it. You see, the collapse was not as a result of the stabilized deregulated system but because investors there had neither a historical track record to look to to evaluate risk attached to new financial instruments or to new classes of borrowers. A chain of bad decisions (the realm of behavioral finance) snowballed up to the point of crisis. From then onward, investors had developed a more mature decision-making process. Re-tightening of regulation was not required or even desirable. The cost to them as a percentage of GDP was 4% in Sweden, 8% in Norway, and 11% in Finland. Interestingly, Sweden at one point nationalized its largest bank, Nordbanken, at a cost of 3% of its GDP (which for us would be like investing $414 billion in the bailout of only one company), waited out the storm, and then resold it at a profit, offsetting almost all of the fiscal impacts of the entire banking crisis on their government.

Surely some degree of regulation is desirable and necessary. It need not be onerous or complicated. And strict, thorough and consistent oversight and enforcement is absolutely necessary.

I expect that a lot of politicians are going to have a knee-jerk reaction to all this, and they're going to want to dramatically change the rules again. At least in the short term, that's probably the worst thing we can do to restore investor confidence to the capital markets. The damage is done, the lesson is learned. In the mean time, the government that had a hand in setting up the dominoes needs to put some effort into damage control.

Just like Bush and McCain, you now want to socialize the losses of billionaires. I must ask, why should anyone listen to your free market baloney in the future, now that you are a fan of committing theft of my tax dollars (one of your favorite terms) to achieve wealth redistribution (another of your favorites) from the least wealthy taxpayers to the wealthiest? And, since this bailout is intended to help the wealthiest of Americans, and even foreigners, who are heavily invested in these funds, why should the wealthiest Americans not be taxed to pay for it?

Mind you, I'm not saying that effort should be expended to ensure that people are compensated for their own poor decisions. Homeowners that can't pay their mortgage need to be foreclosed on and be allowed to declare bankruptcy. Investors that bought AAA-rated CMBS tranches that aren't performing need to take the loss. And an executive with tens of millions of dollars in stock options should watch their value dwindle to basically nothing. The phrase "privatized profit, socialized loss" that is getting thrown around as cheap rhetoric needs to be pretty much ignored. Poor decisions aren't being rewarded (very much, yet)! Its about "damage control" to our financial institutions. Not the players in the market, mind you, but the plays.

Also, the U.S. government deserves blame for having become overregulated in the first place, might also be blamed for a botched process of deregulation, and has already done the damage for which I am pissed off. Now they need to be prepared to clean up their mess.

Your attempt at class warfare is unoriginal and bespeaks a lack of very basic understanding of how the economy works. Who do you think is hurt the most when an economy stops growing? When unemployment spikes? When wages decline? Poor unskilled labor--invariably. And even then, it is besides the point.

[RedScare]

Also, the U.S. government deserves blame for having become overregulated in the first place, might also be blamed for a botched process of deregulation, and has already done the damage for which I am pissed off. Now they need to be prepared to clean up their mess.

Your attempt at class warfare is unoriginal and bespeaks a lack of very basic understanding of how the economy works. Who do you think is hurt the most when an economy stops growing? When unemployment spikes? When wages decline? Poor unskilled labor--invariably. And even then, it is besides the point.

Class warfare. A sure sign that someone is still pining for deregulated markets in the face of the apparent abuses of them. The two biggest financial disasters, assuming Bush's statements last night are true, came from abuses of deregulated markets. It is human nature that some will take advantage of the system if given the chance. Those using class warfare to defend deregulation are merely trying to clear the table for their own attempts at taking advantage of others. Taking advantage is only a crime if we make it one. Theft by deception is legal if we legalize deception. Hiding behind 'free market' and class warfare' banners does nothing to change my opposition to allowing the powerful to take advantage of the less powerful.

All regulation does is smooth out the bumps in the mountains and valleys of the economy. They are insurance against collapse. Since the monied interests have no interest in suffering the valleys, nor in paying for them, it is only fair that they be regulated, so that the rest of us do not have to pay for them. Your insistence otherwise in the face of the obvious merely shows your devotion to a flawed ideology in the face of incontrovertable fact. No amount of fancy economic blustering will change the obvious, and thankfully, few are listening to you.

[TheNiche]

Class warfare. A sure sign that someone is still pining for deregulated markets in the face of the apparent abuses of them. The two biggest financial disasters, assuming Bush's statements last night are true, came from abuses of deregulated markets. It is human nature that some will take advantage of the system if given the chance. Those using class warfare to defend deregulation are merely trying to clear the table for their own attempts at taking advantage of others. Taking advantage is only a crime if we make it one. Theft by deception is legal if we legalize deception. Hiding behind 'free market' and class warfare' banners does nothing to change my opposition to allowing the powerful to take advantage of the less powerful.

All regulation does is smooth out the bumps in the mountains and valleys of the economy. They are insurance against collapse. Since the monied interests have no interest in suffering the valleys, nor in paying for them, it is only fair that they be regulated, so that the rest of us do not have to pay for them. Your insistence otherwise in the face of the obvious merely shows your devotion to a flawed ideology in the face of incontrovertable fact. No amount of fancy economic blustering will change the obvious, and thankfully, few are listening to you.

Are you drunk?

[Mark F. Barnes]

You can't make me believe with any amount of economic mental masturbation, that deregulation is a good thing here. Can someone explain where in any case the consumer benefited from deregulation at some point in time. You give the big conglomerates free reign, and they figure out a way to screw the consumer. Demanding accountability is never a bad thing. Free Market, free enterprise, yada yada yada. Regulating something doesn't kill either, it just makes you accountable and forces you to play by the rules. The finance market is the worst of all, when it comes to being completely legit. Too much smoke and mirrors in the business of finance. we are just seeing the tip of the iceberg right now, if people think this thing is going to be quickly fixed, they are drunk. We will be working this issue out for years.

[houstonmacbro]

This might have already been discussed before, so excuse me if I am just going over the obvious, but this is something I see:

1. The $700 billion bailout is not going to do squat for homebuyers because they will no longer be making loans to 'underqualified' individuals

2. Now, you will be required to put down 20% of the cost of the home (on a $100k house that is $20,000 folks! ... $300k is $60k)

3. I think this is going to drive the housing market FURTHER into retraction, not expansion (see above points)

[musicman]

1. The $700 billion bailout is not going to do squat for homebuyers because they will no longer be making loans to 'underqualified' individuals

lending to risky individuals is a big reason why we are where we are currently.

chase is buying wamu cause they've made so many bad loans.

[Mark F. Barnes]

This might have already been discussed before, so excuse me if I am just going over the obvious, but this is something I see:

1. The $700 billion bailout is not going to do squat for homebuyers because they will no longer be making loans to 'underqualified' individuals

2. Now, you will be required to put down 20% of the cost of the home (on a $100k house that is $20,000 folks! ... $300k is $60k)

3. I think this is going to drive the housing market FURTHER into retraction, not expansion (see above points)

Hate to break this to you Bro. If you can't afford 20% down, you are in over your head. That use to be standard practice at one time. Just like it use to be common practice to keep 6 months salary in the bank to fall back on in case of need. Now days too many people living on credit and check to check.

[houstonmacbro]

lending to risky individuals is a big reason why we are where we are currently.

chase is buying wamu cause they've made so many bad loans.

I was a risky individual but I haven't missed a mortgage payment. If I had to be a traditional buyer and come up with $25,000 to put down on my house it would have never happened.

And I doubt that I am alone -risky or non-risky buyers alike.

Hate to break this to you Bro. If you can't afford 20% down, you are in over your head. That use to be standard practice at one time. Just like it use to be common practice to keep 6 months salary in the bank to fall back on in case of need. Now days too many people living on credit and check to check.

I do not disagree with you. Probably so, but the way I see it, it was a great leverage opportunity because I didn't put nearly anything down and transferred the risk to the banks.

IF (and pray it never happens) anything happened, I'd walk without losing anything (except damaged credit).

To blame this on BUYERS is ridiculous. The lenders are more to blame than anyone.

[musicman]

Probably so, but the way I see it, it was a great leverage opportunity because I didn't put nearly anything down and transferred the risk to the banks.

and many others have that same mindset and look what happened. if someone puts some money down, it does show some stability and increases likelyhood that they will take responsibility for their own actions.

[Mark F. Barnes]

I was a risky individual but I haven't missed a mortgage payment. If I had to be a traditional buyer and come up with $25,000 to put down on my house it would have never happened.

And I doubt that I am alone -risky or non-risky buyers alike.

I do not disagree with you. Probably so, but the way I see it, it was a great leverage opportunity because I didn't put nearly anything down and transferred the risk to the banks.

IF (and pray it never happens) anything happened, I'd walk without losing anything (except damaged credit).

To blame this on BUYERS is ridiculous. The lenders are more to blame than anyone.

I think you are missing the whole point Mac. It's not the BUYERS fault at all. other than the default on their promissory notes. But it is the LENDERS fault for loaning people who are in over their head. POOR LENDING PRACTICES. Not requiring a person to be liquid enough to put down 20% is a poor lending practice IMHO. Get my point?

[houstonmacbro]

and many others have that same mindset and look what happened. if someone puts some money down, it does show some stability and increases likelyhood that they will take responsibility for their own actions.

I am not arguing with you. I actually agree with you. What I am saying to blame this on buyers is just insane.

The banks and other lenders saw $$$$$ and they went after it. Now that their investments haven't turned out so well they are crying foul.

But this was their game and their rules.

Seems a little lame in my opinion.

I think you are missing the whole point Mac. It's not the BUYERS fault at all. other than the default on their promissory notes. But it is the LENDERS fault for loaning people who are in over their head. POOR LENDING PRACTICES. Not requiring a person to be liquid enough to put down 20% is a poor lending practice IMHO. Get my point?

I agree 100%. When I was told I could buy a house with no money down, I was a little incredulous.

I can't do it for groceries, so how could I do it with a house.

LOL

Oh well ... I guess my attitude is why spend mine, when I can spend yours (ode to L'il Kim).

ROTFLMAO

[musicman]

I am not arguing with you. I actually agree with you. What I am saying to blame this on buyers is just insane.

but then you complain that underqualified people aren't going to get loans...gotta make a committment mac.

[BryanS]

Are you drunk?

If he is... I'd like to buy him another...

[houstonmacbro]

but then you complain that underqualified people aren't going to get loans...gotta make a committment mac.

I think you're misconstruing what I am saying. I am saying that the bailout is not going to help lending. Because now the rules are tighter and so even fewer people will be buying homes.

How is this gonna help to keep all those E-class Mercedes in the drives of mortgage brokers?