Liquidity? I think not.

We keep hearing from the interested parties that this is just a short-term liquidity problem. That the market is temporarily too freaked out about mortgages.

Wrong. This is a bad loan problem. Countrywide and others made no-doc, no-down, cash-back, inflated-appraisal loans to people who had absolutely no chance of paying them back. This will not go away when "liquidity" returns to the market. It will go away when people start putting 20% down and buying houses for 3x income again.

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