Goldman economist slips over gunwales

“This is the operative statement. The others are inoperative”—Ron Zeigler*

[THEN] The total amount of likely losses in the subprime sector is “unlikely to hold major risk to capital markets in general,” said Jan Hatzius, an analyst with Goldman Sachs.
Dow Jones Newswires Feb. 16 2007

[NOW] ...Hatzius writes that the mortgage problems extend far beyond the subprime sector. Surprisingly [well, not to anybody paying attention—Ed], among prime-quality adjustable-rate mortgages, the deterioration is, if anything, more pronounced…

…ARMs that aren't subprime are going down the tube even faster than riskier loans. Prime ARM delinquencies are above their worst levels of the 2001 recession, he points out [Emphasis added]. By contrast, subprime fixed-rate delinquencies are well below their recession levels.

But here's a key point: prime-quality and so-called alt-A mortgages (middling credits, lower than prime but better than sub-prime) have longer reset periods—two years or more—than subprime. That means we haven't seen the full impact of the sharply borrowing higher costs on many ARMs yet [Emphasis added].

As teaser rates on ARMs get adjusted, Hatzius suggests the teaser-rate problem could turn out to be bigger than the subprime problem*.
No Matter How You Slice It, the Decline Isn't Over [$$]
by Randall W. Forsyth
Barron’s Online Mar. 15 2007

* Press secretary to Richard Nixon, Apr. 17 1973, retracting Watergate-related statements shown to have been demonstrably false.
** Coincidentally, The New York Times this morning reports that Mortgage Trouble Clouds Homeownership Dream noting the impact of resetting 2/28 ARMs sold with teaser rates.