Think positive!

Even the most casual observer can plainly see where the roots of many of today's economic problems lie simply by examining two stories appearing amidst a torrent of news this morning at Bloomberg.

Grabbing all the attention today in this report, part of the ongoing saga of the nation's Government Sponsored Enterprises - Fannie Mae and Freddie Mac - companies who, depending upon who you talk to, seem to be having renewed difficulty getting their books to square, is retired Fed Governor William Poole tossing around the word "insolvency" as if that is somehow going to help the situation:

Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae's assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said.

``Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,'' Poole, 71, who left the Fed in March, said in the interview yesterday.

Honestly, what's he trying to accomplish with this fear mongering?

Doesn't he know that the entire U.S. financial system is based on "faith" and, regardless of the underlying condition of the world's most important mortgage lenders with the implicit multi-trillion dollar guarantee of the U.S. government, talk like this doesn't do anybody any good.

If Mr. Poole had the best interests of the housing market, financial system, and the American way of life in mind when making these comments, he would have adopted a tone more like Bloomberg columnist John Berry in today's column.

Worst of Housing Crisis Is Behind Us -- Really
The intense pain caused by the bursting of the housing bubble is beginning to ease. Really.

That may be hard to believe, given the rapid increase in mortgage foreclosures, big year-over-year declines in home prices and housing starts, and continuing writedowns in the value of mortgage-backed securities.

Yet a close look at the recent flow of housing data provides convincing evidence that the worst of the decline is over. Investors who are fleeing financial-institution stocks -- including those of Fannie Mae and Freddie Mac -- ought to think twice about the housing outlook.

Take sales of existing homes, which account for about 85 percent of all U.S. housing sales. They peaked at an annual rate of 7.25 million in the fall of 2005 and fell to 4.89 million in January. In May, it was 4.99 million.

The recent figures aren't a guarantee that such sales won't decline a bit more in coming months. Still, their relative stability probably indicates that home prices have dropped enough to encourage buyers to re-enter the market. And there's no reason to think the huge drop in sales since 2005 will be repeated.

See?

That's the way you do it. Happy talk like this is just the cure for what ails the economy - get enough people on board with this line of thinking and you can virtually "will the economy back to health".

William Poole ought to be ashamed of himself.

[Note: Please just ignore the whole idea that the stabilization of sales at historic lows is, in large part, a result of the massive wave of foreclosures that are coming back onto the market and that this will only exacerbate home price declines, resulting in even more foreclosures, all of which will have a debilitating effect on the economy as a whole.]
How many times do people have to see existing home sales stabilizing before they will be convinced that it will only be a matter of months, a year or too at the most, before we can all return to life as we knew it in 2005, when we were all rich beyond our wildest dreams simply as a result of owning a home and we could all borrow and spend freely?

Everybody just think positive!