Credit risk in the mortgage market is being assumed by the government, and market risk by the Fed.

However, beyond the mortgage market, other huge risks are lurking, especially in the US financial system credit cards, car loans, and presumably a few other things.

What started with subprime mortgages spread to all collateralized debt obligations, endangered municipal and mortgage insurance and reinsurance companies and threatened to unravel the multi trillion dollar credit default swap market.

But, in America s home mortgage market, this is much less common.

But that is precisely why a government managed mortgage market is dangerous.

In the US, reviving the credit markets requires stopping the mortgage defaults driven by negative equity.

Legislation had been enacted to eliminate discrimination against women in access to credit, including mortgage loans.

Perhaps the buy on dips confidence index has slipped lately because of negative news concerning credit markets, notably the US sub prime mortgage market, which has increased anxiety about the fundamental soundness of the economy.

That time is over, as the breakdown of the American mortgage securitization market has shown.

Previously, private investors in the US simply did not lend to mortgage seekers whose credit history was below prime.

It may make sense for central banks (or Fannie Mae, America s major government sponsored mortgage company) to buy mortgage backed securities in order to help provide market liquidity.

Off season farming credit for market gardening and produce.

Frankly, had the models at least allowed for the possibility of credit market imperfections, the Fed might have paid more attention to credit market indicators as a reflection of overall financial market conditions, as central banks in emerging market countries do.

The mortgage crisis and the credit crunch have led to bailouts for the banks and the nationalization of housing finance and insurance.

Even pro market commentators have taken up the cry that the market will not provide the needed credit.

First, housing can be made more affordable for poor and middle income Americans by converting the mortgage deduction into a cashable tax credit.

Given how financially stretched US households are, a good part of this tax rebate may be used to pay down high credit card balances (or other unsecured consumer credit) or to postpone mortgage delinquency.

In Mexico, the market for new low and middle income housing has grown rapidly, thanks to the creation of a market for residential mortgage securities in 2003.

Its banks and financial institutions were not tempted to buy the mortgage supported securities and credit default swaps that ruined several Western financial institutions.

One sure way to reduce the savings rate in China would be to develop an American style mortgage market there.

Who wouldn t want credit markets to serve the cause of home ownership? So we start by introducing some real competition into the mortgage lending business.

Instead, as the credit crunch and housing price decline continue, an epic mortgage bailout appears increasingly likely, possibly costing US taxpayers a trillion dollars or more.

After the sub prime mortgage crisis, politicians alleged that the market was short sighted and irrational, and rushed to propose new regulations.

Moreover, the US housing market appears to be stabilizing....Overall, the US mortgage market has remained resilient, although the sub prime segment has deteriorated a bit more rapidly than had been expected.

Some, observing the crash of the sub prime mortgage market, say, Don t worry, it is only a problem in the real estate sector.

An interest rate rise might take the heat out of the mortgage market, but it will also chill the rest of the economy.

This brings us back to the US Treasury s plan to spend hundreds of billions of dollars to unclog the sub prime mortgage market.

The staff saw the relaxation of lending standards in the US mortgage market, but noted that borrowers at risk of significant mortgage payment increases remained a small minority, concentrated mostly among higher income households that were aware of the attendant risks.

Consumer credit began in China only in the late 1990 s, with regulations allowing banks to offer mortgage loans, which now amount to about 10 of total loans.

It is perplexing because in conventional analyses of which activities should be in the public domain, running the national mortgage market is never mentioned.

The main problem is that the flow of foreign credit has been impaired because US mortgage backed securities and the derivatives based on them have become nearly unsellable everywhere.

It is to Spence s credit that the report manages to avoid both market fundamentalism and institutional fundamentalism.

His reappearance comes just as the credit bubble fueled by the sub prime mortgage boom is about to burst, triggering the worst financial and economic crisis since the Great Depression.

We then call on credit rating agencies to certify that the less risky of these mortgage backed securities are safe enough for pension funds and insurance companies to invest in.

An audit would also reveal more details about financial market interventions like those in 2008, when the Fed purchased mortgage securities from Bear Stearns and AIG.

Occupy the Mortgage Lenders

So its failure to press the United States to redress the mortgage market vulnerabilities that precipitated the current financial crisis indicates that much remains to be done.

Indeed, with its recent decision to pursue QE3, the Fed is focusing once again on the mortgage backed securities market but, given that the market is much healthier now, it is unclear how much good this will do.

Ironically, then, the expanded access to mortgage lending that creates new homeowners in Latin America may end up protecting the region from the disaster that too loose credit created in the US.

And the market is prone to temporary fits of shared enthusiasm for emerging market debt, for Internet stocks, for residential mortgage backed securities, for Greek government debt. Traders need not wait to see when or whether the profits materialize.

While most Asian countries have had relatively limited direct exposure to mortgage related assets, deleveraging by foreign investors and slowing external demand have simultaneously created tighter credit conditions and lower expectations for growth.

To its credit, the IMF not only acknowledges this, but it also provides evidence that developing countries with capital controls were hit less badly by the fallout from the sub prime mortgage meltdown.

MUNICH Once upon a time, stocks were risky and collateralized securities were safe. That time is over, as the breakdown of the American mortgage securitization market has shown.

Policy enhancements have been made to mortgage portability, second homes and mortgage qualification for self employed borrowers.

Market dominant banks still extract hefty fees on debit and credit card transactions from merchants, who are forced to pay a multiple of what a truly competitive market would bear.