Larry Elder on Townhall Today

Larry Elder has an excellent column on Townhall.com today about the credit crisis.  Here are some of the highlights.

George Mason University economist Tyler Cowen says, "We've all heard about the defaults on subprime mortgage loans. But so far, the real story is how little the broader American economy has suffered. Today, banks usually sell their loans to third parties. You might have originally borrowed money from Wells Fargo, but now a bank overseas cashes your mortgage checks.

"If a large group of people can't pay their mortgages, they may lose their homes. But the banks don't suffer as they used to -- local American lenders have already converted those loans into cash and sold off their risk. In fact, German regional banks suffered some of the most significant losses from bad American mortgages. Other European and Asian banks and hedge funds took their lumps as well. American banks essentially bought insurance by exporting their risk overseas."

On falling home prices and mortgage defaults.

U.S. homeowners' equity today equals almost $11 trillion. Price declines for this year and next year may amount to $6 billion, or a 0.05 percent decline -- a worry, but hardly Judgment Day.

Christopher Cagan, of First American Real Estate Solutions, estimates that "the impact of rate sensitivity and subsequent defaults will be well below one-half percent of total mortgage debt outstanding" and spread out over several years.

The column can be found here.