I told a colleague of mine, wait until you see the losses in the 4th Qtr for the banks and corporations.
It is now apparent to nearly everyone that the banks are insolvent, the auto companies are bankrupt and throwing more millions into these vampires is only increasing the losses to society.
The US has reached the breaking point. We simply do not have the money to keep these zombies walking.
There has to be a wholesale flushing of the system. They need to release a pack of rabid dogs in Citibank, AIG, Countrywide and other dens of iniquity and flush them out.
The very people who caused the problem are still running the show. That is insane. Jack Welsh former CEO of GE, last month was crying for the bank CEO's saying if we cut their compensation, they would leave!
Sorry Jack, you old fool. They caused the problem, they pocketed huge, immoral and in some cases, illegal profits now they want us to baill them out, and the fact that so far we have; proves the point that politicians are nothing more than the levers through which the rich bankers control us.
However, the age of the Government Bailout is coming to an end.
With AIG, GM,Citi and more to come going back to the government for more money, the ability for the Fed or Treasury to keep issuing money, is rapidly evaporating.
At some point, soon, it is going to become glaringly obvious that the US will never be able to meet the financial obligations it is creating.
Like my father use to say, never write a check with your mouth that your ass can't cash! We are rapidly approaching that point where if we print more money or issue any more Multi Trillion dollar guarantees, the world will downgrade our debt and stop buying it, since it will be obvious that we cannot meet our obligations and are in fact bankrupt!
The whole idea of even trying to reflate the banks to the pre crash dimensions is ludicrous. Funny, just like there are no atheists in foxholes, there are no capitalists when the system is crashing, they all want to be bailed out by a socialistic government bailout.
The next step will be the nationalization of the big banks, breaking them up and selling the pieces back to the private sector after their balance sheets have been cleaned up. This is not some Communist takeover. The exact same thing happens whenever the FDIC takes over a bank and it is handled in orderly and effective manner and the sun still rises the next day!
And, yes the stockholders and executives will be wiped out as the price the capitalist system exacts for failure, sorry about that Jack!
T
Thursday, February 26, 2009
Tuesday, February 24, 2009
There is a Silver Lining in All o f This!
Perhaps that light at the end of the tunnel some claim to see is a lit fuse!
Consumer Spending?
A key measure of consumer sentiment fell more than expected in February, to the lowest level since its 1967 inception, as Americans remained wary of spending amid the weak economy and rising unemployment.
The Conference Board, a New York-based business research group, said its Consumer Confidence Index fell to 25 in February from a revised reading of 37.4 in January. The index has been touching historic lows since September. Economists had been expecting a reading of 35!
Consumer sentiment is a really vital statistic because it is a barometer of future spending which represents 70% of Gross Economic activity in this country.
Housing market?
The S&P Case-Shiller National Home Price Index reported that prices sank a record 18.2% during the last three months of 2008, compared with the same period in 2007.
National home prices have dropped 26.7% since they peaked during the second quarter of 2006.
“One bright note is that the sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out,” Dr Scott Anderson, Chief Economist, said in the report released by Wells Fargo Friday.
NOT!!
There is nothing in the data suggesting a turn around any time soon.
My forecast as you know is that home prices will plummet to pre-bubblle levels, reflecting the realities of the current economic reality.
On the other hand, silver will move up as house prices move down until you will be able to buy a house with 1,000 oz or less of silver! Today, with silver at $14 oz, it would take about 14,000 oz. Tomorrow, with silver at say, $100 oz and houses at $100,000, that would do it!
The last time this happened was in the early 80's with silver at $50 and homes at $50,000, so it is not as far fetched as it sounds. It illustrates how way out of line home priced got at the peak of the boom when it took almost 40,000 oz of silver!
Go to http://silverpros.blogspot.com/2008/11/why-silver.html for more information
on "why Silver" including a video by Robert Kiyosaki on Investing in Silver.
Consumer Spending?
A key measure of consumer sentiment fell more than expected in February, to the lowest level since its 1967 inception, as Americans remained wary of spending amid the weak economy and rising unemployment.
The Conference Board, a New York-based business research group, said its Consumer Confidence Index fell to 25 in February from a revised reading of 37.4 in January. The index has been touching historic lows since September. Economists had been expecting a reading of 35!
Consumer sentiment is a really vital statistic because it is a barometer of future spending which represents 70% of Gross Economic activity in this country.
Housing market?
The S&P Case-Shiller National Home Price Index reported that prices sank a record 18.2% during the last three months of 2008, compared with the same period in 2007.
National home prices have dropped 26.7% since they peaked during the second quarter of 2006.
“One bright note is that the sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out,” Dr Scott Anderson, Chief Economist, said in the report released by Wells Fargo Friday.
NOT!!
There is nothing in the data suggesting a turn around any time soon.
My forecast as you know is that home prices will plummet to pre-bubblle levels, reflecting the realities of the current economic reality.
On the other hand, silver will move up as house prices move down until you will be able to buy a house with 1,000 oz or less of silver! Today, with silver at $14 oz, it would take about 14,000 oz. Tomorrow, with silver at say, $100 oz and houses at $100,000, that would do it!
The last time this happened was in the early 80's with silver at $50 and homes at $50,000, so it is not as far fetched as it sounds. It illustrates how way out of line home priced got at the peak of the boom when it took almost 40,000 oz of silver!
Go to http://silverpros.blogspot.com/2008/11/why-silver.html for more information
on "why Silver" including a video by Robert Kiyosaki on Investing in Silver.
Wednesday, February 18, 2009
Obama Blinked!
Although the so called Bankruptcy Cramdown provision; the ability of BK judges to reduce the amount of loans on property in the course of the BK, is extended for the first time to first mortgages on principal residences; the fact that there is no general across the board principal reduction for home owners will keep the bill from solving the housing crisis.
Giving "Incentives" to unscrupulous lenders to cooperate and lower mortgage payments will not work. It hasn't worked in Hope or Hope for homeowner plans as we have seen.
There are simply too many considerations and limitations; who owns the mortgage or part of the mortgage? Who is servicing it? Do you know that some well known mortgage services eagerly purchase defaulting loans and make huge profits by adding fees and foreclosing on them? What are the mortgage owners or their investors contractual obligations toward modification or principal reduction, etc.
Only a Federal Law could cut through those considerations and force action by the lenders.
I believe Obama knows the answer is principal reductions on home mortgages down to 80-90% of CURRENT market value is the most powerful answer to the foreclosure crisis.
This would allow the 20% or so of all mortgage holders who are underwater, whose mortgage is more than the house is worth, to reset to payments they can afford. If these people are not relieved, they have ZERO incentive to sacrifice their life savings or retirement savings to keep paying their mortgage.
Perhaps in a few months Obama can say, we tried everything else and it did not work, so we are now going to force lenders to reduce principal on all loans to affordable levels. He probably felt it would be too radical and face too much opposition from the Know-Nothings, like Eric Cantor; and getting something passed now was better than getting nothing passed.
However, the hour is late, perhaps too late to put the housing monster back in its cage. It is already sucking up the scarce money homeowners need to service not only their mortgage but their credit cards, auto and student loans, which will cause massive defaults in those areas, hurting the banks even more.
There is even more carnage just over the horizon as I point out in an earlier posting.
There is already baked-in to the forecasts by Credit Suisse about 6 Million more foreclosure over the coming two years because of massive, Trillion dollar defaults in Alt-A and Option Arm loans.
Already 60% of Option Arms are underwater and more than 80% of borrowers are paying less than the interest owed on each payment, thereby Increasing the amount of principal owed with every payment!
Also, something I have not seen discussed is that even Prime loan defaults will probably skyrocket in the next 2-3 years. Historically their defaults peak 3-5 years after they are issued.
That means that the Trillions of dollars in prime loans written at the peak of the boom, 2005 and 2006 and therefore have suffered the sharpest home value drops,will enter peak default periods in 2008-2011. Already, Prime loans are entering default stage at a higher rate than sub prime in some areas!
Finally, the Know Nothings are crazy if they feel that an overall mortgage default rate of 10% is acceptable!
This is fully 10 Times the normal mortgage default rate! Many banks have about 50% of their capital in residential mortgages. A 10% default rate on their assets would reduce their lending capacity by 10-20x that amount. Such a blow to their lending and therefore earning ability would cripple them.
The Know Nothings are now, predictably, so consumed with the fear (they love to spread fear, remember the Yellow and Orange Alerts during the 2004 campaign?) that a homeowner who cheats, obviously a minority of all borrowers gets bailed out?
What about the banks and Wall St where All of the big banks and brokerage houses, rating agencies and others who created this mess in the first place? Aren't they being bailed out regardless? Oh, I forgot, the banks are too big to fail, but the homeowner is too small to bail.
In summation, I believe Obama's Home Rescue Plan is too little, too late, especially after the Know Nothings get finished savaging it. Will he get a second chance to make it better? Will it matter?
Giving "Incentives" to unscrupulous lenders to cooperate and lower mortgage payments will not work. It hasn't worked in Hope or Hope for homeowner plans as we have seen.
There are simply too many considerations and limitations; who owns the mortgage or part of the mortgage? Who is servicing it? Do you know that some well known mortgage services eagerly purchase defaulting loans and make huge profits by adding fees and foreclosing on them? What are the mortgage owners or their investors contractual obligations toward modification or principal reduction, etc.
Only a Federal Law could cut through those considerations and force action by the lenders.
I believe Obama knows the answer is principal reductions on home mortgages down to 80-90% of CURRENT market value is the most powerful answer to the foreclosure crisis.
This would allow the 20% or so of all mortgage holders who are underwater, whose mortgage is more than the house is worth, to reset to payments they can afford. If these people are not relieved, they have ZERO incentive to sacrifice their life savings or retirement savings to keep paying their mortgage.
Perhaps in a few months Obama can say, we tried everything else and it did not work, so we are now going to force lenders to reduce principal on all loans to affordable levels. He probably felt it would be too radical and face too much opposition from the Know-Nothings, like Eric Cantor; and getting something passed now was better than getting nothing passed.
However, the hour is late, perhaps too late to put the housing monster back in its cage. It is already sucking up the scarce money homeowners need to service not only their mortgage but their credit cards, auto and student loans, which will cause massive defaults in those areas, hurting the banks even more.
There is even more carnage just over the horizon as I point out in an earlier posting.
There is already baked-in to the forecasts by Credit Suisse about 6 Million more foreclosure over the coming two years because of massive, Trillion dollar defaults in Alt-A and Option Arm loans.
Already 60% of Option Arms are underwater and more than 80% of borrowers are paying less than the interest owed on each payment, thereby Increasing the amount of principal owed with every payment!
Also, something I have not seen discussed is that even Prime loan defaults will probably skyrocket in the next 2-3 years. Historically their defaults peak 3-5 years after they are issued.
That means that the Trillions of dollars in prime loans written at the peak of the boom, 2005 and 2006 and therefore have suffered the sharpest home value drops,will enter peak default periods in 2008-2011. Already, Prime loans are entering default stage at a higher rate than sub prime in some areas!
Finally, the Know Nothings are crazy if they feel that an overall mortgage default rate of 10% is acceptable!
This is fully 10 Times the normal mortgage default rate! Many banks have about 50% of their capital in residential mortgages. A 10% default rate on their assets would reduce their lending capacity by 10-20x that amount. Such a blow to their lending and therefore earning ability would cripple them.
The Know Nothings are now, predictably, so consumed with the fear (they love to spread fear, remember the Yellow and Orange Alerts during the 2004 campaign?) that a homeowner who cheats, obviously a minority of all borrowers gets bailed out?
What about the banks and Wall St where All of the big banks and brokerage houses, rating agencies and others who created this mess in the first place? Aren't they being bailed out regardless? Oh, I forgot, the banks are too big to fail, but the homeowner is too small to bail.
In summation, I believe Obama's Home Rescue Plan is too little, too late, especially after the Know Nothings get finished savaging it. Will he get a second chance to make it better? Will it matter?
Sunday, February 15, 2009
Congressman Chas Linbergh on Fed Creation of "Business Cycles"
Cong Chas Linbergh, (R-MN), father of the famous pilot, on “Business Cycles are Not Natural!”
To cause high prices, all the Federal Reserve Board has to do is to lower interest rates producing an increase in credit and rising asset prices. (Bubble, anyone?)
Then when businessmen are adjusted to the new economy, the Fed tightens interest rates, choking off prosperity in mid career.
It can cause mild swings in the economy (recessions) by making small adjustments in the interest rates or produce wild pendulum like swings (depressions) by making larger increases and decreases in the interest rate.
This is the strangest most dangerous power ever given to any special privileged class by any government ever.
The Federal Reserve Bank is private, conducts its business for the sole purpose of obtaining the most profits from the use of other people’s money.
They know in advance when they will create a panic and can profit greatly from that information. Inflation or deflation work equally well for them since they control the economy.
___________________________________________________________________________________
We will continue to be victimized by the Fed until we take back the power to issue and control our own money. So far, Cong Ron Paul is the only lawmaker courageous enough to call for this. Spread the word so that more people become aware that Greedy, Murderous International Bankers are victimizing the American people and demand an end to it!
Ti
To cause high prices, all the Federal Reserve Board has to do is to lower interest rates producing an increase in credit and rising asset prices. (Bubble, anyone?)
Then when businessmen are adjusted to the new economy, the Fed tightens interest rates, choking off prosperity in mid career.
It can cause mild swings in the economy (recessions) by making small adjustments in the interest rates or produce wild pendulum like swings (depressions) by making larger increases and decreases in the interest rate.
This is the strangest most dangerous power ever given to any special privileged class by any government ever.
The Federal Reserve Bank is private, conducts its business for the sole purpose of obtaining the most profits from the use of other people’s money.
They know in advance when they will create a panic and can profit greatly from that information. Inflation or deflation work equally well for them since they control the economy.
___________________________________________________________________________________
We will continue to be victimized by the Fed until we take back the power to issue and control our own money. So far, Cong Ron Paul is the only lawmaker courageous enough to call for this. Spread the word so that more people become aware that Greedy, Murderous International Bankers are victimizing the American people and demand an end to it!
Ti
Saturday, February 14, 2009
"Bank opposition to helping homeowners, Senator Durbin says, "was (is) very shortsighted in light of the mess they have created in our economy."
Banks Are Not Serious About Helping to Keep People in Their Homes!
You have heard that "banks want you to be able to pay your mortgage, they don't want your house." I have even said that in the past. While true on an individual level, today, bankers are taking a short term view to first to protect themselves, (and their jobs) then deal with the devil later on.
Look at These Excerpts from Yahoo News, Friday, Feb 13, 2009
The (housing) industry strategy all along has been to buy time and thwart regulation, financial-services lobbyists tell BusinessWeek . "We were like the Dutch boy with his finger in the dike," says one business advocate who, like several colleagues, insists on anonymity, fearing career damage. Some admit that, in retrospect, their clients, which include Bank of America (NYSE:BAC - News), Citigroup (NYSE:C - News), and JPMorgan Chase (NYSE:JPM - News), would have been better off had they agreed two years ago to address foreclosures systematically rather than pin their hopes on an unlikely housing rebound.
A major reason financial institutions and investors are so determined to avoid modifying loan terms more aggressively has to do with accounting nuances, say industry lobbyists. If, for example, a bank lowered the balance of a certain mortgage, there would be a strong argument that it would have to reduce the value on its balance sheet of all similar mortgages in the same geographic area to reflect the danger that the region had hit an economic slump. Under this stringent approach, financial industry mortgage-related losses could far surpass even the grim $1.1 trillion estimated by Goldman Sachs (NYSE:GS - News) in January. A desire to postpone this devastating situation helps explain lenders' intransigence, says Rick Sharga, vice-president of marketing at RealtyTrac, an Irvine (Calif.) firm that analyzes foreclosure patterns.
What About the Plans Already Announced to Help Homeowners?
Hope Now Alliance, a government-endorsed private sector organization announced by Paulson on Oct. 10, 2007. Lenders promised to cooperate with nonprofit credit counselors who would help borrowers prevent defaults. Faith Schwartz, a former subprime mortgage executive, was put in charge.
An analysis White did of a sample of 21,219 largely subprime mortgages modified in November under Hope Now in 2008 found that only 35% of the cases resulted in lower payments. In 18%, payments stayed the same; in the remaining 47%, they rose. The reason for this strange result: Lenders and loan servicers are tacking on missed payments, taxes, and big fees to borrowers' monthly bills.
Then there was Hope for Homeowners. It was already anticipated that its fine print would discourage all but a few borrowers. "We knew it was likely to have limited appeal," says Preston, the former secretary of HUD, which oversees the FHA. George Miller, executive director of the American Securitization Forum, a Wall Street trade group, calls the program and its 25 refinanced loans "useless" because of the onerous details.
The banks clearly are looking out for themselves first and foremost. As one banker put it, "Banks are too big to fail and homeowners are too small to bail!"
So, that is their attitude. They foisted fraudulent financial products onto homeowners and are now refusing to take responsibility and help their victims.
Here is a Typical Story of Homeowners Hoodwinked by the Banks!
Accept the possibility that you have already lost your house, you did sign the mortgage, probably without being represented by a lawyer, that is your responsibilty.
Now, you can either be put out of the house with No money left to your name, a bad thing, having raided your savings, retirement and children's funds, or you can stop paying now and be put out later with your savings intact to finance a new start, a better outcome.
With more and more people underwater, making payments on homes worth less than their mortgage, this will become a popular tactic and will eventually force the banks to help.
In fact, we are seeing an increasing number of people who stop making their payments and challenge the banks in court. If the bank cannot produce your original mortgage and note, they cannot proceed with the foreclosure! It is estimated that fully 40% of banks cannot produce this documentation, so it is well worth the risk.
Contact me directly if you would like more information on this subject or assitance in implementing it. I can be reached at 646-961-3818
Oh, what about the Moral Hazzard such a brazzen act of self help would produce? I think the danger of producing Moron Hazzards are much greater; people exhausting their money to make payments on homes that are underwater!
You have heard that "banks want you to be able to pay your mortgage, they don't want your house." I have even said that in the past. While true on an individual level, today, bankers are taking a short term view to first to protect themselves, (and their jobs) then deal with the devil later on.
Look at These Excerpts from Yahoo News, Friday, Feb 13, 2009
The (housing) industry strategy all along has been to buy time and thwart regulation, financial-services lobbyists tell BusinessWeek . "We were like the Dutch boy with his finger in the dike," says one business advocate who, like several colleagues, insists on anonymity, fearing career damage. Some admit that, in retrospect, their clients, which include Bank of America (NYSE:BAC - News), Citigroup (NYSE:C - News), and JPMorgan Chase (NYSE:JPM - News), would have been better off had they agreed two years ago to address foreclosures systematically rather than pin their hopes on an unlikely housing rebound.
A major reason financial institutions and investors are so determined to avoid modifying loan terms more aggressively has to do with accounting nuances, say industry lobbyists. If, for example, a bank lowered the balance of a certain mortgage, there would be a strong argument that it would have to reduce the value on its balance sheet of all similar mortgages in the same geographic area to reflect the danger that the region had hit an economic slump. Under this stringent approach, financial industry mortgage-related losses could far surpass even the grim $1.1 trillion estimated by Goldman Sachs (NYSE:GS - News) in January. A desire to postpone this devastating situation helps explain lenders' intransigence, says Rick Sharga, vice-president of marketing at RealtyTrac, an Irvine (Calif.) firm that analyzes foreclosure patterns.
What About the Plans Already Announced to Help Homeowners?
Hope Now Alliance, a government-endorsed private sector organization announced by Paulson on Oct. 10, 2007. Lenders promised to cooperate with nonprofit credit counselors who would help borrowers prevent defaults. Faith Schwartz, a former subprime mortgage executive, was put in charge.
An analysis White did of a sample of 21,219 largely subprime mortgages modified in November under Hope Now in 2008 found that only 35% of the cases resulted in lower payments. In 18%, payments stayed the same; in the remaining 47%, they rose. The reason for this strange result: Lenders and loan servicers are tacking on missed payments, taxes, and big fees to borrowers' monthly bills.
Then there was Hope for Homeowners. It was already anticipated that its fine print would discourage all but a few borrowers. "We knew it was likely to have limited appeal," says Preston, the former secretary of HUD, which oversees the FHA. George Miller, executive director of the American Securitization Forum, a Wall Street trade group, calls the program and its 25 refinanced loans "useless" because of the onerous details.
The banks clearly are looking out for themselves first and foremost. As one banker put it, "Banks are too big to fail and homeowners are too small to bail!"
So, that is their attitude. They foisted fraudulent financial products onto homeowners and are now refusing to take responsibility and help their victims.
Here is a Typical Story of Homeowners Hoodwinked by the Banks!
Stefanie and James Smith of Santa Clarita, Calif., fear they may need the help of a bankruptcy court if they are to keep the subdivision home they bought for $579,000 in November 2005. Stefanie, 37, a university human resources coordinator, and James, 40, a federal law enforcement agent, borrowed the entire amount in two subprime loans that required a total monthly payment of $3,000. A representative of their lender, Countrywide, told them not to worry, says Stefanie: They would be able to refinance in a year.
By mid-2007 they were running late on payments, and refinancing options had dried up. With their monthly bill scheduled to jump to more than $4,000 this January due to a rising mortgage rate, Stefanie contacted Countrywide last summer. She asked for a loan modification so they could avoid default. In December the lender said it would be willing to increase their payment by $600. That was better than the scheduled rise of $1,100, so the Smiths agreed.
But now they are struggling to pay the higher amount. Countrywide's parent, BofA, declined to comment, citing the Smiths' privacy. After BusinessWeek's questions, though, Countrywide called them to discuss cutting their payments.
"We knew when we bought that the payments would be a stretch," says Stefanie. She regrets assuming they would be able to refinance at a lower rate. "We are not deadbeats," she adds. "All we want is a mortgage we can afford."
Our Advice to Homeowners Facing Foreclosure!
If you are now losing your home because you cannot pay your mortgage, don't rape your 401(k) or your children's college fund, you will Never be able to replace those funds in the economy we are entering.Accept the possibility that you have already lost your house, you did sign the mortgage, probably without being represented by a lawyer, that is your responsibilty.
Now, you can either be put out of the house with No money left to your name, a bad thing, having raided your savings, retirement and children's funds, or you can stop paying now and be put out later with your savings intact to finance a new start, a better outcome.
With more and more people underwater, making payments on homes worth less than their mortgage, this will become a popular tactic and will eventually force the banks to help.
In fact, we are seeing an increasing number of people who stop making their payments and challenge the banks in court. If the bank cannot produce your original mortgage and note, they cannot proceed with the foreclosure! It is estimated that fully 40% of banks cannot produce this documentation, so it is well worth the risk.
Contact me directly if you would like more information on this subject or assitance in implementing it. I can be reached at 646-961-3818
Oh, what about the Moral Hazzard such a brazzen act of self help would produce? I think the danger of producing Moron Hazzards are much greater; people exhausting their money to make payments on homes that are underwater!
Wednesday, February 11, 2009
Now, the Fed Swoops in to Pick Up the Spoils!
CNN, 11 Feb 2009 "Administration officials committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money." (Money it creates out of thin air, but charges interest on. )
We have seen this play before, The First Great Depression in the 1930's among other debacles.
First, the Fed funds an enormous bubble in some asset class, real estate, stocks, Oil, etc.
That kicks off an irrational exuberance, eg. The Roaring Twenties.
The Fed and its minions stubbornly declare that all is well, there is no reason to worry, the economy has entered a new phase. Gone are bad old recessions once and for all.
Remember as late as 2004 Alan "Double Bubble" Greenspan, Fed chairman said, "Bubble? What Bubble, it is impossible to have a National Bubble in real estate since each market is local!" He also famously said, just a few years prior, A Bubble in the Stock Market? No Way!
Eventually, of course the Bubble implodes, (no tree ever reaches the sky!) resulting in astronomical losses, especially to the poor schnubs who came late to the party.
Public money, (loaned, gratiously by the Fed) is needed to clean up the mess and save Wall St, or the banks from collapsing.
What to do with all those failed assets that people bought for outrageous prices at the height of the boom, with money borrowed from the banks? (read FED)
Well, they must be liquidated, so they set up a Public/Private partnership to get rid of them.
Whether it is the Reconstruction Finance Corporation from the First Great Depression, the Resolution Trust Corporation of the 1980's or whatever Official sounding term they will tag on this one, the result will be the same.
Assets that exploded in price, rank speculation fueled by the Fed, gobbled up investor's funds as their prices soared into the stratosphere. Fun, riches, good times for all!
What the average man did not realize however was that the knowledgeable investor was Selling while he was buying! They made enormous profits.
However, once the inevitable crash took place and values plumeted, the banks that financed the investors had to be saved from all the loans on their books that were now in default!
This called for a tremendous influx of tax payer money. Tax payers took the losses, while the private sector took the profits.
Now, what to do with all of those worthless assets? Let's set up a Public/Private partnership and dispose of them. Back come the bank funded (read Fed) money men to pick up
the troubled assets at fire sale prices! The SCARFF plan. (You know, like the college kids scarff down beer and burgers?)
Here is a real life example:
In 1989, the nation faced a financial crisis caused by the collapse of hundreds of savings and loan associations, who had taken advantage of loosened regulations to invest aggressively in real estate and other ventures, many of which went sour.
We have seen this play before, The First Great Depression in the 1930's among other debacles.
First, the Fed funds an enormous bubble in some asset class, real estate, stocks, Oil, etc.
That kicks off an irrational exuberance, eg. The Roaring Twenties.
The Fed and its minions stubbornly declare that all is well, there is no reason to worry, the economy has entered a new phase. Gone are bad old recessions once and for all.
Remember as late as 2004 Alan "Double Bubble" Greenspan, Fed chairman said, "Bubble? What Bubble, it is impossible to have a National Bubble in real estate since each market is local!" He also famously said, just a few years prior, A Bubble in the Stock Market? No Way!
Eventually, of course the Bubble implodes, (no tree ever reaches the sky!) resulting in astronomical losses, especially to the poor schnubs who came late to the party.
Public money, (loaned, gratiously by the Fed) is needed to clean up the mess and save Wall St, or the banks from collapsing.
What to do with all those failed assets that people bought for outrageous prices at the height of the boom, with money borrowed from the banks? (read FED)
Well, they must be liquidated, so they set up a Public/Private partnership to get rid of them.
Whether it is the Reconstruction Finance Corporation from the First Great Depression, the Resolution Trust Corporation of the 1980's or whatever Official sounding term they will tag on this one, the result will be the same.
Assets that exploded in price, rank speculation fueled by the Fed, gobbled up investor's funds as their prices soared into the stratosphere. Fun, riches, good times for all!
What the average man did not realize however was that the knowledgeable investor was Selling while he was buying! They made enormous profits.
However, once the inevitable crash took place and values plumeted, the banks that financed the investors had to be saved from all the loans on their books that were now in default!
This called for a tremendous influx of tax payer money. Tax payers took the losses, while the private sector took the profits.
Now, what to do with all of those worthless assets? Let's set up a Public/Private partnership and dispose of them. Back come the bank funded (read Fed) money men to pick up
the troubled assets at fire sale prices! The SCARFF plan. (You know, like the college kids scarff down beer and burgers?)
Here is a real life example:
In 1989, the nation faced a financial crisis caused by the collapse of hundreds of savings and loan associations, who had taken advantage of loosened regulations to invest aggressively in real estate and other ventures, many of which went sour.
Fearing both the size of the bill if the troubled institutions went under (too big to fail!) and the damage such a meltdown might cause to the economy at large, Congress and President George H.W. Bush in 1989 created the Resolution Trust Corporation to take over troubled thrifts, as the banks were known.The mission of the corporation was to dispose of the assets as quickly as possible for maximum value.
In swooped the Fed financed investors who made out like bandits when the economy returned to normal (waiting for the Next bubble!)
So you see the Fed loves economic Panics, as they were called in the last century, they make money when the economy goes up and when it crashes! Is it any wonder they are so keen on causing Panics, Recessions and Depressions?
Monday, February 9, 2009
A Pendulum Does Not Stop Half Way!
I mentioned in a former post the a pendulum does not stop in mid swing. In places where prices soared the highest, they will fall the lowest:
In some places, U.S. housing has suffered more damage than from a fire or a tornado. In Lehigh Acres, near Fort Myers, Florida, the New York Times says houses are selling 80% off their peaks. “Fast food restaurants are laying people off or closing. Crime is up, school enrollment is down and one in four residents received food stamps in December, nearly a fourfold increase since 2006.”It’s back to the ’30s in Lee County, Florida:
And the carnage will not be limited to those super heated areas, unfortunately.
Today, Mark Zandi, Chief Economist of Moodys, says he sees the end of the housing crash, "late this year" which is as much wiggle room you can give yourself and still be in this year; “presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year.”
I say he has been smoking his socks. He is ignoring the many Tsunamis just over the horizon, such as the Alt_A and Option Arm mortgages due to reset in the next few years, with 80% of the people paying less than even the full interest payment. The scandalous number of people Underwater, paying on mortgages worth less than their homes, now estimated to be about 20%, the crushing unemployment, now running about 20,000 per Day and other horrific factors.
But I guess he is just gambling to being the first one to say he "saw the end of the crisis" but the light he sees at the end of the tunnel is a lit fuse!
Sunday, February 8, 2009
Is This the Solution to the Housing Problem?
"Here is how the government aims to solve the housing crisis: "The FDIC's program, which is underway at failed lender IndyMac, calls for making monthly payments more affordable by reducing interest rates, lengthening loan terms or deferring principal. Servicers aim to reduce payments to no more than 31% of a borrower's monthly income. So far, more than 10,000 delinquent loans have been modified, and offers have been made to another 20,000 borrowers."
So, the plan is to reduce the payments on the mortgage while keeping the amount of the mortgage the same?
That's nuts! Why would anyone commit to continue paying on a mortgage that is substantially greater than the value of their property ? Already, 20% (33% in May, 2009) of all mortgaged homes are underwater, worth less than the mortgage on it and that number will increase as home prices continue to plummet.
Talk about Moral Hazzard! Once homeowners realize that home prices are not coming back in their lifetimes, and that they have bailed out the banks but they are still stuch paying their losses, that strange music you hear will be Jingle Mail, the sound of keys being sent back to the banks in bunches!
There is only one realistic way to solve the homeonwer's dilemma, the same way it was done in the First Great Depression. Buy up the unaffordable mortgages at the value of 80% of the current market value of the home and refinance at that Loan to Value, in a fixed, 30 year loan at maybe 6% interest.
This will provide the debt relief and the payment relief that home owners need to be able to afford their homes and have money left for other bills.
I do not want to hear that the bank's will be taking a loss when the same homeowners have already poured Trillions of dollars into the banks as bailout funds and loan guarantees. What it will do is to stop the steady erosion of the bank assets that will continue as long as the mortgage problem is not solved, leading to further deterioration of the bank's assets which will prevent them from lending which will starve the economy of the funds it needs to operate.
So, the plan is to reduce the payments on the mortgage while keeping the amount of the mortgage the same?
That's nuts! Why would anyone commit to continue paying on a mortgage that is substantially greater than the value of their property ? Already, 20% (33% in May, 2009) of all mortgaged homes are underwater, worth less than the mortgage on it and that number will increase as home prices continue to plummet.
Talk about Moral Hazzard! Once homeowners realize that home prices are not coming back in their lifetimes, and that they have bailed out the banks but they are still stuch paying their losses, that strange music you hear will be Jingle Mail, the sound of keys being sent back to the banks in bunches!
There is only one realistic way to solve the homeonwer's dilemma, the same way it was done in the First Great Depression. Buy up the unaffordable mortgages at the value of 80% of the current market value of the home and refinance at that Loan to Value, in a fixed, 30 year loan at maybe 6% interest.
This will provide the debt relief and the payment relief that home owners need to be able to afford their homes and have money left for other bills.
I do not want to hear that the bank's will be taking a loss when the same homeowners have already poured Trillions of dollars into the banks as bailout funds and loan guarantees. What it will do is to stop the steady erosion of the bank assets that will continue as long as the mortgage problem is not solved, leading to further deterioration of the bank's assets which will prevent them from lending which will starve the economy of the funds it needs to operate.
Saturday, February 7, 2009
Taking Worthless Securites from Banks and Putting Them on the Backs of American Workers!
"...moving that heavy load of dubious and worthless paper --out of the banks and putting it on the back of American labor.
That is what the Reconstruction Finance Corporation is doing now. They talk about loans to banks... but they say very little about that other business of theirs which consists in relieving the swindlers who promoted investment trusts in this country and dumped worthless foreign securities into them and then resold that mess of pottage to American investors under cover of their own corporate titles.
The Reconstruction Finance Corporation is taking over those worthless securities from those investment trusts with United States Treasury money at the expense of the American taxpayer and the wage earner."
These excerpts are from Congressional testimony by Congressman Louis T. McFadden during the the First Great Depression. Has sort of a familiar ring to it, doesn't it? Make certain substitutions, such as mortgage derivatives instead of "investment trusts, " and mortgage securities for "foreign securities" and you realize that this has happened before!
The Federal Reserve Bank was neck deep in producing the First Great Depression and it and its minions are equally involved in this evolving, 2nd Great Depression! Substitute the Reconstruction Finance Corporation for the "Bad Bank" being dredged up by Wall st and you will see they want to do the same thing this time that they did last.
That is what the Reconstruction Finance Corporation is doing now. They talk about loans to banks... but they say very little about that other business of theirs which consists in relieving the swindlers who promoted investment trusts in this country and dumped worthless foreign securities into them and then resold that mess of pottage to American investors under cover of their own corporate titles.
The Reconstruction Finance Corporation is taking over those worthless securities from those investment trusts with United States Treasury money at the expense of the American taxpayer and the wage earner."
These excerpts are from Congressional testimony by Congressman Louis T. McFadden during the the First Great Depression. Has sort of a familiar ring to it, doesn't it? Make certain substitutions, such as mortgage derivatives instead of "investment trusts, " and mortgage securities for "foreign securities" and you realize that this has happened before!
The Federal Reserve Bank was neck deep in producing the First Great Depression and it and its minions are equally involved in this evolving, 2nd Great Depression! Substitute the Reconstruction Finance Corporation for the "Bad Bank" being dredged up by Wall st and you will see they want to do the same thing this time that they did last.
Ron Paul Calls for End of Federal Reserve Bank!
Ron Paul, Texas Congressman, Calls for abolishing the Federal Reserve Bank!
"Madame Speaker, I rise to introduce legislation to restore financial stability to America's economy by abolishing the Federal Reserve. Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy."
You can read the rest of Paul's statement before Congress here:
http://news.goldseek.com/RonPaul/1233818100.php
Apparently, the news was not significant enough to be carried on the Main Stream Media.
This is Explosive! The last Congressman who called for the end of the Federal Reserve, after 3 attempts, was killed! His name is Louis T. McFadden, a Republican from Pennsylvania. He was actually not only a Congressman, he was also the Chairman House Banking and Currency Committee.
You can read his 25 minute Congressional tirade against the Fed in the Congressional Record, pages 12595-12603 or Google it.
As you have seen throughout my writings on this Blog and elsewhere, The Fed, which is as Federal as FedEx, is a Private Bank and was behind the various booms and busts we have suffered through since it was created on the night before Christmas eve, 1913 when only the conspirators were present in Congress. They had sent everyone else home for the holidays, assuring them that a vote would not be taken before 1914.
The owners of the Fed are the richest and most powerful men on the planet, International Bankers, led by the Rothschilds.
The Patriarch of the clan is now Lord Alfred Rothschild of the UK. Look up "The Creature From Jekyl Island" the story of the "Hatching" of the Federal Reserve Plot. It is scarier than anything that Steven King ever imagined, because it it TRUE!
I know it is hard to believe and I am not going to go into detail in this posting, but these people own the banks that own the Fed. Look at this, courtesy of Eustace Mullins, "Secrets of the Federal Reserve" which every American needs to read:
The shareholders of these banks which own the stock of the Federal Reserve Bank of New York are the people who have controlled our political and economic destinies since 1914. They are the Rothschilds, of Europe, Lazard Freres (Eugene Meyer), Kuhn Loeb Company, Warburg Company, Lehman Brothers, Goldman Sachs, the Rockefeller family, and the J.P. Morgan interests. These interests have merged and consolidated in recent years, so that the control is much more concentrated. National Bank of Commerce is now Morgan Guaranty Trust Company. Lehman Brothers has merged with Kuhn, Loeb Company, First National Bank has merged with the National City Bank, and in the other eleven Federal Reserve Districts, these same shareholders indirectly own or control shares in those banks, with the other shares owned by the leading families in those areas who own or control the principal industries in these regions.
The Kingpin of this group is the Rothschilds, who own or control an empire, including until recently, The Bank of England; Reuters and the Associated Press, of over a reputed $500 Trillion Dollars. Although the Rothschilds are not now a household word, having successfully replaced the Fat, Greedy Banker icon with the Fat Black Welfare Queen as the cause of America's ecomomic woes, their ownership or control of most of the other shareholders, (JP Morgan was Rothschilds direct representative, they are allied with Kuhn Loeb through marriage, etc.) gives them effective control of the Fed and therefore control of everything and everyone in the US that depends on money to survive!
Among the Feds biggest depredations, prior to the current one, was the stealing of the entire gold stores of the US in 1933, when they "Bought" over 200 Million oz of gold, which had been confiscated by Roosevelt, for $11 Billion, which they "created" out of thin air, just for this purpose: "Roosevelt ordered the people to give their gold to private interests- that is, to banks, and he took control of the banks so that all the gold and gold values in them, or given into them, might be handed over to the predatory International Bankers who own and control the Fed. "
Of course, the First Great Depression was their handiwork also, as Ron Paul alludes to above.
I urge you, for the good of yourself and the Nation to follow up on this information. Google Louis T McFadden and Eustace Mullins. If we are to take back our country, it is going to have to be a massive grassroots effort and time is of the essence!
"Madame Speaker, I rise to introduce legislation to restore financial stability to America's economy by abolishing the Federal Reserve. Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy."
You can read the rest of Paul's statement before Congress here:
http://news.goldseek.com/RonPaul/1233818100.php
Apparently, the news was not significant enough to be carried on the Main Stream Media.
This is Explosive! The last Congressman who called for the end of the Federal Reserve, after 3 attempts, was killed! His name is Louis T. McFadden, a Republican from Pennsylvania. He was actually not only a Congressman, he was also the Chairman House Banking and Currency Committee.
You can read his 25 minute Congressional tirade against the Fed in the Congressional Record, pages 12595-12603 or Google it.
As you have seen throughout my writings on this Blog and elsewhere, The Fed, which is as Federal as FedEx, is a Private Bank and was behind the various booms and busts we have suffered through since it was created on the night before Christmas eve, 1913 when only the conspirators were present in Congress. They had sent everyone else home for the holidays, assuring them that a vote would not be taken before 1914.
The owners of the Fed are the richest and most powerful men on the planet, International Bankers, led by the Rothschilds.
The Patriarch of the clan is now Lord Alfred Rothschild of the UK. Look up "The Creature From Jekyl Island" the story of the "Hatching" of the Federal Reserve Plot. It is scarier than anything that Steven King ever imagined, because it it TRUE!
I know it is hard to believe and I am not going to go into detail in this posting, but these people own the banks that own the Fed. Look at this, courtesy of Eustace Mullins, "Secrets of the Federal Reserve" which every American needs to read:
The shareholders of these banks which own the stock of the Federal Reserve Bank of New York are the people who have controlled our political and economic destinies since 1914. They are the Rothschilds, of Europe, Lazard Freres (Eugene Meyer), Kuhn Loeb Company, Warburg Company, Lehman Brothers, Goldman Sachs, the Rockefeller family, and the J.P. Morgan interests. These interests have merged and consolidated in recent years, so that the control is much more concentrated. National Bank of Commerce is now Morgan Guaranty Trust Company. Lehman Brothers has merged with Kuhn, Loeb Company, First National Bank has merged with the National City Bank, and in the other eleven Federal Reserve Districts, these same shareholders indirectly own or control shares in those banks, with the other shares owned by the leading families in those areas who own or control the principal industries in these regions.
The Kingpin of this group is the Rothschilds, who own or control an empire, including until recently, The Bank of England; Reuters and the Associated Press, of over a reputed $500 Trillion Dollars. Although the Rothschilds are not now a household word, having successfully replaced the Fat, Greedy Banker icon with the Fat Black Welfare Queen as the cause of America's ecomomic woes, their ownership or control of most of the other shareholders, (JP Morgan was Rothschilds direct representative, they are allied with Kuhn Loeb through marriage, etc.) gives them effective control of the Fed and therefore control of everything and everyone in the US that depends on money to survive!
Among the Feds biggest depredations, prior to the current one, was the stealing of the entire gold stores of the US in 1933, when they "Bought" over 200 Million oz of gold, which had been confiscated by Roosevelt, for $11 Billion, which they "created" out of thin air, just for this purpose: "Roosevelt ordered the people to give their gold to private interests- that is, to banks, and he took control of the banks so that all the gold and gold values in them, or given into them, might be handed over to the predatory International Bankers who own and control the Fed. "
Of course, the First Great Depression was their handiwork also, as Ron Paul alludes to above.
I urge you, for the good of yourself and the Nation to follow up on this information. Google Louis T McFadden and Eustace Mullins. If we are to take back our country, it is going to have to be a massive grassroots effort and time is of the essence!
Wednesday, February 4, 2009
Monday, February 2, 2009
Interest Rates to Skyrocket This Year!
The Only bright light for the real estate market is about to be smothered. Interest rates will skyrocket this year and next making it that much harder to qualify for mortgages, especially at today's high real estate prices.
The culprit is the US government. It must finance last year's record budget deficit of 1/2 Trillion dollars plus this years record busting deficit of about $2 Trillion, plus the stimulus package and all of the "quantitative easing" of the Federal Reserve, (which again, is as Federal as Federal Express!). And let's not forget the original $700 Billion Wall St Bailout, plus the approximately $2 Trillion additional which will be needed sometime in the next 18 months to bail out the banks again.
You can also expect to see various other multi Billion dollar bailouts; autos, states, pension funds, etc.
These humungus expenditures will be financed by the government saturating the market with Treasury Bonds. As more and more treasuries are issued, their prices will start to fall and when that happens their yield goes in the opposite direction, Up.
Also, 40% of our national debt is held by China and other foreign governments. When the prices of Treasuries and thus their investment in them starts declining, interest rates will have to be raised to incent them to buy more and to hold on to what they already have. Already the Chinese have dumped over 20 Billion in Fannie Mae and Freddie Mac Bonds during the last 5 months of the 2008. They have also halted investment in many American companies. They realize the US is going to flood the market with new Treasury issues and depress the prices.
Not only housing, but all businesses will be adversely affected with the rise in interest rates, including the stock market, which I believe will see Dow 5,000 before the year is out! Possibly as early as the release of the 4th Qtr, 2008 economic data, due out shortly.
It is important that you get out of debt, especially credit card debt, where they can increase your interest rates at will, as soon as possible. For information on debt relief, see our site: http:HowtoSolveYourMoneyProblems.Com
The culprit is the US government. It must finance last year's record budget deficit of 1/2 Trillion dollars plus this years record busting deficit of about $2 Trillion, plus the stimulus package and all of the "quantitative easing" of the Federal Reserve, (which again, is as Federal as Federal Express!). And let's not forget the original $700 Billion Wall St Bailout, plus the approximately $2 Trillion additional which will be needed sometime in the next 18 months to bail out the banks again.
You can also expect to see various other multi Billion dollar bailouts; autos, states, pension funds, etc.
These humungus expenditures will be financed by the government saturating the market with Treasury Bonds. As more and more treasuries are issued, their prices will start to fall and when that happens their yield goes in the opposite direction, Up.
Also, 40% of our national debt is held by China and other foreign governments. When the prices of Treasuries and thus their investment in them starts declining, interest rates will have to be raised to incent them to buy more and to hold on to what they already have. Already the Chinese have dumped over 20 Billion in Fannie Mae and Freddie Mac Bonds during the last 5 months of the 2008. They have also halted investment in many American companies. They realize the US is going to flood the market with new Treasury issues and depress the prices.
Not only housing, but all businesses will be adversely affected with the rise in interest rates, including the stock market, which I believe will see Dow 5,000 before the year is out! Possibly as early as the release of the 4th Qtr, 2008 economic data, due out shortly.
It is important that you get out of debt, especially credit card debt, where they can increase your interest rates at will, as soon as possible. For information on debt relief, see our site: http:HowtoSolveYourMoneyProblems.Com
Sunday, February 1, 2009
Isn't Now the Best Time to Buy Real Estate?
It is if you get a Great Deal that cashflows like crazy, because you will soon have No Equity in the property! Also, keep
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