1. 1 1 THE UNIQUENESS OF THIS RECESSION

2. 2 2 FORECLOSED PROPERTY INVENTORY Percent of Total Mortgage Loans Date Percent Unsold Foreclosures Source: LoanPerformance-First American CoreLogic, Inc. REO + Foreclosures

3. 3 3 U.S. HOME PRICES Year-Over-Year Change: Case - Shiller Index Percent Change in Prices Date Source: S&P

4. 4 4 JAPAN REVISITED? Aftermath of Japan's Burst Bubble –$ 3 TRILLION IN BAD DEBTS –DENIAL OF THE CRISIS & ITS SEVERITY –BY 1998 $1 TRILLION HAD STILL NOT BEEN WRITTEN DOWN –JAPAN'S ECONOMY SUFFERED THE “LOST DECADE” Comparison with Today’s U.S. Meltdown –$ 3+ TRILLION IN POTENTIAL BAD DEBTS –QUICKER GOVERNMENT RESPONSE/WRITE DOWNS –BAD DEBT SPREAD ABROAD –MISGUIDED POLICY INITIATIVES –STIMULTANEOUS BURDENS (ENERGY, WAR)

5. 5 5 TOKYO LAND PRICES Composite Land Price Index Year Land Price Index Year 2000 = 100 Note: In 1991 the average price of a home was $850/sq. ft. and the average price of prime commercial land was $10,000+ per sq. ft. Source: Statistics Bureau of Japan

6. 6 6 EXCESSIVE EXUBERANCE Japanese Stock Market Compared to GDP Date Index 1970 = 1 Source: Japanese Central Bank, Finance.Yahoo.com, UN Statistics Div.

7. 7 7 EXCESSIVE EXUBERANCE The U.S. Experience: Stock Values/GDP Date Index 1975 = 1 Source: S&P, BEA

8. 8 8 THE LOST DECADE From Boom to Gloom - Japanese Real Growth Year Percent Gain in Real GDP Source: U.S. Census Bureau

9. 9 9 A REPEAT OF THE LAST U.S. HOUSING CORRECTION? S&L Financial Crisis Fall in Home Prices Collapse in Home Construction

10. 10 THE S&L BAILOUT Preceded by poorly conceived deregulation Initial denial of problem - attempt to "save" S&Ls Insolvency of FSLIC in 1986 Creation of Resolution Trust Corporation in 1989 1000+ S&Ls with $.5 trillion in assets are liquidated Tax Payer Cost exceeds $124 billion Housing market correction lasts 5 years

11. 11 TODAY'S VS. LAST HOUSING MARKET CORRECTION Peak-To-Trough Statistics 1989-922007-2008 Housing Starts-48.5%-59.3% GDP-1.2%N/A Employment-1.44%-0.11% Unemployment Rate7.8%5.0% Home Prices-6.77%-11.3% Source: BLS,BEA,S&P,U.S. Census Bureau