Massive white-collar unemployment from mortgage and financial services companies will bring collapse of economy and stock market
Fred Day
Mar. 10, 2007

The effect of the real estate bubble burst is far deeper than you can imagine. Most economists are concerned about the effect on the economy from the loss of construction jobs. But the biggest problem is arising from the total collapse of the mortgage and financial services companies.

In 2001 during the start of the last slowdown, these mortgage and financial services companies absorbed most of the people who lost their jobs. The real estate sector absorbed very few of these people. Now the same folks are facing threat to their jobs as mortgage bankers fail one after the other.

WMC Mortgage, the fourth-largest supreme lender in the U.S., this week stopped making mortgages without down payments or to borrowers with credit scores below 600. WMC last year had $33 billion in new loan volume, according to industry newsletter Inside B&C Lending.

WMC’s action is following a general trend. The sector is contracting very rapidly. The contraction is giving rise to massive job risks to millions. There are many mortgage brokers that will also go out of business.

Problem is that these people whose livelihood is threatened are not making meager money in burger-flipping jobs. They make on average over $100, 000 per year. These kinds of job losses will accelerate deflation very rapidly. The effects can be devastating in the stock market.

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