In a recent magazine's article Forbes published that the flattening yield curve and mortgage risk exposure is eating into regional banks profits. And North Fork Bank was chosen to illustrate that. Indeed, today report shows that NFB profit fell by 19%. The bank is selling mortgages out to reduce its exposure, but that eats into profits.

In a related note, I want to point to a wonderful article on real estate bubble:

As with most economic issues of national and global significance, their percussive consequences are rarely felt in most people's pockets until months or even years after an event has unfolded. Often, the possibility of such negative personal effects are denied or rationalized until all is lost and past inaction is regretted.

Do you know what is filling the bubble at this stage? As this article points out, 70% of Americans believe that there is a house bubble and housing prices will drop soon, but only 30% think that this price decline will hit their own house. In other words, we are all insane optimists, believing that whatever happens, only other people will be in trouble, not us. Who are those "other people", then?