The National Association of Realtors, which represents 1.3 million agents, this fall called for the Federal Reserve to tighten underwriting standards, which would make it harder for lenders to offer loans to borrowers who could not afford the higher payments that subprime loans often require down the road.
Watsa can play this reserve two waysas a cushion to offset future underwriting problems, or to add to earnings when and if he deems future risks insignificant.