He told you so: The mortgage broker who predicted all this

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We are in the eye of a financial storm that evidently took much of America by surprise. Was it inevitable? That’s for history to decide. I’ll just say this: Many saw the storm coming. It did not appear out of nowhere. Tonight I’ll highlight one storm-spotter and ask for your nominations for others.

I’ve made no secret of my admiration for mortgage broker, Fed watcher and weekly Internet columnist Lou Barnes. Not only did Lou stand on his Internet mountaintop and warn that this would happen, he said it again, and again. I’m not saying he’s been right on everything, just that he saw this coming. From his weekly columns:

August 31, 2007: Structured-finance products all over the world are crashing in value or cannot be valued at all. Frequently leveraged, the fall in value is a balance-sheet risk both to investors and their lenders.

Sept. 7, 2007: The credit panic is spreading into a global affair far beyond mere mortgages...This is not a transient emergency, nor a single-firm threat like Long Term Capital Management in ’98; we and the Fed have a systemic problem growing worse.

Nov. 2, 2007: The last 48 hours make it clear that credit losses are systemic and too large to recognize. It is too late for daylight, proper valuation, and workout. It is firewall time, on the way to bailout.

Nov. 16, 2007: This predicament is unique (since the 1930s... heh-heh...): capital is evaporating, and the capital is leveraged.

Dec. 14, 2007: The acute economic problem today is the functional bankruptcy of the Western banking system. Losses in trillions of dollars of weird assets have impaired systemic capital; central banks have kept the system liquid, and undoubtedly will continue to do so, but nobody has an idea how to get the system to make new loans. You have to have capital to do that, and we’re fresh out.

Dec. 21, 2007: We have a wreck in the belly of the financial system: credit losses are so large that if recognized -- written off -- would bankrupt the whole show.

Read more of Lou Barnes’ dire -- and accurate -- predictions below.

Feb. 15, 2008: The credit problem has now moved beyond the banks: the markets for securitized credit are seizing-up the way the banks did last fall, and credit starvation is deepening... Everybody wants market-based solutions, but what to do with a market too badly broken to heal itself?

Feb. 22, 2008: The public policy response to the credit crunch here is paralyzed ... Secretary Paulson insists that this adventure is a normal, cyclical re-pricing of credit; he must know otherwise, but does not know what to do.

March 7, 2008: The Fed has failed. As have the Treasury, Congress, and the White House.

April 18, 2008: the financial system is still too busted to function properly, credit is extremely scarce and expensive, the system is terribly vulnerable.

June 13, 2008: The big end of today’s financial system is insolvent, broke, liquid but without capital, huge losses still to be recognized; credit shortage spreading to small institutions. ... this is NOT like the last time. This is different.’

Sept. 12, 2008: The banking system is beyond self-healing, and is in a downward and self-reinforcing spiral, and traditional measures are exhausted

What I’ve left out of this summary are Lou’s frequent calls for a massive government bailout to recapitalize banks and get bad assets off their books so they can lend again. He’s been saying for about a year that this is both inevitable and smart. Increasingly, it appears he’s right about the former.

But I digress. Please use the comment section to highlight others who saw this coming. Specific links to their writings would be great.

-- Peter Viles