Are We Immunized Against it?

No... I was not referring to the H1N1 flu, which someone told me one unfortunate air-stewardess referred to as the dreaded HINI (Hee Nee) flu. Poor girl, she was probably grounded after that.

Here, I am referring to Banks' attitude towards lending. Apparently, US banks have tightened their lending standards, after experiencing near-death. As one lender puts it : " Six years ago, standards were pretty permissive; and two years ago, all you needed was a pulse. These days, people who have reserves that equal the amount of the loan are getting rejected."

Now throw in the recent 2% rise in 30 years US Treasuries, which is the common benchmark for US mortgages, the lending becomes near impossible. Consequently, the 2.1 million unoccupied houses in the US will impede any recovery. Including the available for sale properties, it would take close to 10 months, just to unload them. Four months into President Obama's tenure, Housing, the engine that powered every US recovery since 1960 is stalled. The lousy job market, with unemployment rate expected to hit 10% have made things worse.

Still, the market wants to believe that this time around it would be different - Government spending will kick-start housing, and then consumer spending comes around to kick-start the economy. Seems simple enough... But, the US home-owners are still waiting for that to happen.

In the meantime, US Banks remain trigger-shy. Is this contagious? Hopefully not. With Asian exports still weakening, Asia will increasingly have to depend on domestic consumption, and a credit-shy banking system will not help. Now in Singapore, considering the currently available 1% mortgage rates, I must say we are immunized and that my concerns are misplaced. In fact, I am impressed by the confidence Banks have on consumers. May be it is the belief that Singaporeans don't default on their homes. Well, let see as the story unfolds.