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Here's a scary article posted at zerohedge.com on November 18, 2009 by Tyler Durden:

"...Bob Toll 'Yesterday's subprime is today's FHA. It's a definite train wreck'

Bob Toll, speaking at the 7th annual UBS building and building products conference, and who has been selling TOL stock over the past several years like it is going out of style, had identified the next subprime crisis. Not surprisingly, it is contained within the very fabric of the US backstopped array alphabet soup institutions.

'Yesterday's subprime is today's FHA,' Toll, whose Horsham, Pennsylvania-based company is the largest builder of luxury homes in the U.S., said today at a New York conference for builders sponsored by UBS AG. 'It's a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.'

As a reminder, Fannie Mae's former credit officer Edward Pinto recently said that the FHA is $54 billion underwater. The FHA said 456,000 of its loans, or 8.2 percent, were in default as of September. That was up from 5.6 percent in September 2008.

As Zero Hedge has long claimed, the only difference from the 2007 subprime implosion and today is that then the companies at fault were allowed to go bankrupt. Now, the US government itself is the most irresponsible subprime lender in existence. Whether the US can go bankrupt is more of a philosophical than practical question. Although if you follow the price of gold, you may get a sense that the tide is finally turning on even this most sacred of assumptions...."

being somewhat curious about how in the world the FHA could operate in such an irresponsible manner, I visited their website at fha.com and almost couldn't believe what I read under the graphic "Refinance Your Home." It said (if you can believe it):

"Homeowners enjoy the benefits of investing in their property year after year. For some, there comes a time when that investment can come in handy. An FHA refinance loan can prove to be an effective way to put that equity to work."

Seems like there is at least $54 billion of all that equity that's not being put to work...

Here we go again.

- Ed Smith, Publisher
The EHS Letter Manual