5-18-09
Dan Ferris, S&A Digest
Yesterday, the government announced it would expand bailout efforts to include insurance companies, earmarking some of the $130 billion in remaining TARP funds to boost confidence in the sector
The reality is that the government can't possibly bail out 18% of the corporate bond market, the entire stock market, and a big chunk of the commercial real estate sector, (the total of the life insurer's asset reserves) not even if it spent 100% of the remaining $130 billion of TARP money on life insurers, which is highly unlikely.
According to a recent report by Bridgewater Associates, between ratings downgrades and actual losses, the 13 largest publicly traded U.S. life insurance companies would need about another $400 billion just to stay afloat. But what if that's not enough? Everything the government has spent so far hasn't been enough to fix anything.
It's a legitimate question, whether losses will be taken by the insurance companies, their investors, and their clients (which is what ought to happen) or whether they'll be taken by the taxpayers (which would be a real crime). I don't see how the government could put it on the taxpayer without risking hyperinflation. It would have to print trillions, which it has done already to no avail.
5-20-09
Wall st Journal says Met Life, one of the largest life insurers, has direct exposure to $36 Bil in commercial real estate. It has tangible equity of $19 Bil. If its commercial real estate investments incur a 25% loss, half of its tangible equity will be wiped out! This may trigger demands from state regulators to replace the loss capital at a time when its stocks will have been hard hit by the loss of its equity! This could set off a Run on the company as panicked policy holders seek to draw out as much of their cash as possible, as quickly as possible.
Insurance companies are in big danger because of their exposure not only to commercial real estate, where various estimated call for a default rate of 30% in $700 Bil worth of CRMBS, Commercial Mortgage Backed Securities, but also to variable annuities where they have guaranteed annuity holders a return of the S&P or better.
Corporate bonds, another "safe" investment for insurance companies, where default rates as high as 10% have been forecast, are yet another troubled area for life insurers.
It is very likely, according to my research that we will see the failure or insolvency of several of the biggest life insurance companies in the world.
What would happen if your life insurance carrier collapsed? http://silverpros.blogspot.com/2009/04/what-would-happen-if-your-life.html
Showing posts with label bailout. Show all posts
Showing posts with label bailout. Show all posts
Monday, May 18, 2009
Friday, April 10, 2009
Do NOT Take Out Retirement Funds to Cover Mortgage Payments!
You Are Screwing Yourself!
"A survey by the Greater Georgia Counseling service found that 29.6 percent of people who called the nonprofit agency for foreclosure prevention counseling received an early distribution from their 401(k) or other retirement plan within the six months prior to contacting the agency.
The fact that people are taking early withdrawals and falling behind on their bills again indicates they only got a temporary solution to their problem,” said Suzanne Boas, president of CCCS of Greater Atlanta."
Also, as the quote says, they fell behind anyway, therefore they will probably end up losing the home and their retirement funds.
Over 90% of respondents were younger than 59 1/2 meaning that they lost 35-45% of the withdrawn funds to early withdrawal penalties and income taxes! Wow, what a blow.
But that is not the worst of it. Assuming the average age of the respondents was 40, they would forfeit a quarter century or more of tax deferred growth on the withdrawn funds, which most likely could never be recovered.
Let me say it again. Wall St has said that Banks are too big to fail, homeowners are too small to Bail!
There ain't no bailout for you Bub! The Fed does not seem to want Obama to offer true relief for the homeowners, which would be a government purchase of mortgages at 80% of the current value of the home and recasting a new 30 year mortgage at that value.
This would certainly make the homeowner's mortgage payments much more affordable as well as eliminate the ridiculous Bubble Premium many homeowners are suffering under. And Please! Don't give me any "irresponsible homeowner" crap! This has to be a universal solution. There is NO Group more irresponsible and undeserving of a bailout, let alone Million dollar bonuses than the banks that created the problem in the 1st place!
Such a solution would stabilize the consumer, allowing them to start spending again and although the banks would get a well deserved spanking in terms of getting less than face value for their mortgages, it would flush out the toxic securities, appropriately disciplining the stock holders and bond holders and allow the rebuilding process to begin. Government support of insolvent banks only prolongs the problem and increases its severity.
My advice to homeowners in homes that are underwater, who cannot afford their mortgage payments, is to STOP paying your mortgage; stay in your home and husband what cash you can to make a clean start.
You don't want to lose your home, you say? You lost it when you signed the mortgage papers. You probably were not represented by an attorney. The loss of your home is the price you pay for that folly.
What about the Moral Hazzard, wu wu! When I was a kid growing up in the streets of Bed Stuy, we learned the lessons of Self Defense. If someone hit you, you hit them back!
The Fed triggered this mess by flooding the banks and the economy with excess credit, which is their classic way to kick off a recession or in some cases like now and 1930, a depression.
The banks and brokers then shoveled the money out to whoever had a pulse, in abject violation of their rules and regulations.
Wall St then did their part in the scheme, securitizing, insuring (for cash in violation of their rules and possibly the law) and leveraging, (with the help of relaxed government regulations) the bad mortgages to Stratoshperic heights, while collecting ungodly profits at every stage. About $13 Trillion in mortgages were pumped up to over $200 Trillion in garbage backed securities.
So tell me again who is acting irresponsibly and who is acting in self defense?
Banks now are refusing to foreclose on delinquent homeowners across the country because they are choking on those toxic loans they made, sort of poetic justice; so you may find that you will be able to stay in your home a lot longer than you think, especially if you live in a mortgage state.
In fact, when you are served with the foreclosure papers, the Notice of Default, or Lis Pendans, contact me. I may be able to help you negotiate with the bank. We find that in about 40% of the cases, we can negotiate a much lower payment because we know where to put the pressure on the banks.
YOU MUST BAIL OUT YOURSELF!
"A survey by the Greater Georgia Counseling service found that 29.6 percent of people who called the nonprofit agency for foreclosure prevention counseling received an early distribution from their 401(k) or other retirement plan within the six months prior to contacting the agency.
The fact that people are taking early withdrawals and falling behind on their bills again indicates they only got a temporary solution to their problem,” said Suzanne Boas, president of CCCS of Greater Atlanta."
Also, as the quote says, they fell behind anyway, therefore they will probably end up losing the home and their retirement funds.
Over 90% of respondents were younger than 59 1/2 meaning that they lost 35-45% of the withdrawn funds to early withdrawal penalties and income taxes! Wow, what a blow.
But that is not the worst of it. Assuming the average age of the respondents was 40, they would forfeit a quarter century or more of tax deferred growth on the withdrawn funds, which most likely could never be recovered.
Let me say it again. Wall St has said that Banks are too big to fail, homeowners are too small to Bail!
There ain't no bailout for you Bub! The Fed does not seem to want Obama to offer true relief for the homeowners, which would be a government purchase of mortgages at 80% of the current value of the home and recasting a new 30 year mortgage at that value.
This would certainly make the homeowner's mortgage payments much more affordable as well as eliminate the ridiculous Bubble Premium many homeowners are suffering under. And Please! Don't give me any "irresponsible homeowner" crap! This has to be a universal solution. There is NO Group more irresponsible and undeserving of a bailout, let alone Million dollar bonuses than the banks that created the problem in the 1st place!
Such a solution would stabilize the consumer, allowing them to start spending again and although the banks would get a well deserved spanking in terms of getting less than face value for their mortgages, it would flush out the toxic securities, appropriately disciplining the stock holders and bond holders and allow the rebuilding process to begin. Government support of insolvent banks only prolongs the problem and increases its severity.
My advice to homeowners in homes that are underwater, who cannot afford their mortgage payments, is to STOP paying your mortgage; stay in your home and husband what cash you can to make a clean start.
You don't want to lose your home, you say? You lost it when you signed the mortgage papers. You probably were not represented by an attorney. The loss of your home is the price you pay for that folly.
What about the Moral Hazzard, wu wu! When I was a kid growing up in the streets of Bed Stuy, we learned the lessons of Self Defense. If someone hit you, you hit them back!
The Fed triggered this mess by flooding the banks and the economy with excess credit, which is their classic way to kick off a recession or in some cases like now and 1930, a depression.
The banks and brokers then shoveled the money out to whoever had a pulse, in abject violation of their rules and regulations.
Wall St then did their part in the scheme, securitizing, insuring (for cash in violation of their rules and possibly the law) and leveraging, (with the help of relaxed government regulations) the bad mortgages to Stratoshperic heights, while collecting ungodly profits at every stage. About $13 Trillion in mortgages were pumped up to over $200 Trillion in garbage backed securities.
So tell me again who is acting irresponsibly and who is acting in self defense?
Banks now are refusing to foreclose on delinquent homeowners across the country because they are choking on those toxic loans they made, sort of poetic justice; so you may find that you will be able to stay in your home a lot longer than you think, especially if you live in a mortgage state.
In fact, when you are served with the foreclosure papers, the Notice of Default, or Lis Pendans, contact me. I may be able to help you negotiate with the bank. We find that in about 40% of the cases, we can negotiate a much lower payment because we know where to put the pressure on the banks.
YOU MUST BAIL OUT YOURSELF!
Friday, December 26, 2008
Bailout This!
Bailout This!
I advise my personal finance sclients who have mortgages that they cannot pay, especially if they owe more than the house is worth, to stop paying their mortgages!
Sounds kind of radical, you say.
But when you understand what the financial system has done to these homeowners you may understand.
It is simply a matter of self defense, financial self defense.
The Wall St syndicates; banks, investment houses, bond insurers, bond rating agencies etc. conspired in true racketeering style, to produce fraudulent financial instruments and then foisted them onto unsophisticated borrowers.
Uncomfortable with the word, fraud? Fraud is a "deception made for personal gain," according to the dictionary.
Rating bonds backed by sub prime mortgages as investment grade, AAA, in order to collect fees, are a prime example.
Issuing insurance; credit default swaps, with no assets to back them up, in order to collect fees, is another example.
Knowingly falsifying data on mortgage applications, in order to collect fees is yet another example.
Without these key fraudulent practices by the mortgage and financial industry, the entire sub prime debacle could never have happened.
Now that the mortgage mess has "inextricably" blown up in the faces of the banks, essentially putting them out of business; they are demanding that home owners whom they have defrauded, continue to honor their commitment to pay their toxic mortgages and to now to bail them out with trillions of taxpayer dollars.
As one Wall St Bigwig said, "The banks are too big to fail and the homeowner is too small to bail."
So the battle lines are drawn. The banks on one side, want to drain your very life blood in order to keep you paying their mortgages, all the while robbing your children and grand children by blackmailing us and getting Trillions of our dollars to repay their losses so they can stay afloat.
These massive loans and cash infusions will produce huge deficits that will be passed onto future generations.
Unfortunately, there is no bailout for the home owner, only half-hearted measures like loan modifications that do not solve the borrower's problems.
Look at the widely touted Hope for Homeowners rescue plan. It was projected to save 400,000 homeowners from foreclosure. Only 312 loans were modified. And we now know that over half of all borrowers who have had their mortgages modified have become delinquent again in less than 6 months.
Modifications are not the answer. Slashing the balance of the outstanding loans to 80% of the current market value of the property, like they did in the First Great Depression is a far more effective remedy as it sets up a payment level that the borrower can afford.
Therefore, in the absence of any willingness on the part of banks or government to bail them out, borrowers are left to defend themselves against the unscrupulous banks. It is really a case of financial self defense. You know where the banks are coming from, it is up to you to fight them.
It is enough that most of these troubled borrowers, especially the 15 million or so who are "Underwater," who owe more than their house is worth, will lose their homes one way or the other.
That is their punishment for taking out a loan without having the advice of a financial professional or being represented at closing by their own lawyer; not the mortgage broker's or real estate broker's lawyer, at the closing.
But it should not mean that they have to ravish their life savings, retirement accounts or their children's inheritance to placate the bloodthirsty banks.
As an experienced real estate investor, former bank loan officer and Personal Financial Coach providing assisting troubled home owners, I have many people in this situation.
My advice to them is to stop paying their mortgage, do not give the banks one more cent of their hard earned money.
We then show them how to remain in their homes for up to two years or so without paying a penny to the banks so that they can accumulate some money to get a fresh start. In some cases, the banks pay my clients thousands of dollars to leave the premises.
What about the eventual foreclosure? Won't it hurt their credit?
Yes it will, but they would be in the same situation credit wise when they eventually lost their homes.
Their choice is to be evicted from their home penniless, after going through their life savings or with the savings intact and a few dollars to move on with.
Also, when the dust settles, they will be able to buy a house for less than half of what they paid for the one they lost, according to knowledgeable experts.
If the banks and their proxies in government will not bail out the home owner, he must bail himself out, period.
Copyright 2008 Bill Young. Bill is a Personal Financial Coach. You can sign up for a free, year long course with Bill in How to Solve Your Money Problems here: http://HowtoSolveYourMoneyProblems.Com
I advise my personal finance sclients who have mortgages that they cannot pay, especially if they owe more than the house is worth, to stop paying their mortgages!
Sounds kind of radical, you say.
But when you understand what the financial system has done to these homeowners you may understand.
It is simply a matter of self defense, financial self defense.
The Wall St syndicates; banks, investment houses, bond insurers, bond rating agencies etc. conspired in true racketeering style, to produce fraudulent financial instruments and then foisted them onto unsophisticated borrowers.
Uncomfortable with the word, fraud? Fraud is a "deception made for personal gain," according to the dictionary.
Rating bonds backed by sub prime mortgages as investment grade, AAA, in order to collect fees, are a prime example.
Issuing insurance; credit default swaps, with no assets to back them up, in order to collect fees, is another example.
Knowingly falsifying data on mortgage applications, in order to collect fees is yet another example.
Without these key fraudulent practices by the mortgage and financial industry, the entire sub prime debacle could never have happened.
Now that the mortgage mess has "inextricably" blown up in the faces of the banks, essentially putting them out of business; they are demanding that home owners whom they have defrauded, continue to honor their commitment to pay their toxic mortgages and to now to bail them out with trillions of taxpayer dollars.
As one Wall St Bigwig said, "The banks are too big to fail and the homeowner is too small to bail."
So the battle lines are drawn. The banks on one side, want to drain your very life blood in order to keep you paying their mortgages, all the while robbing your children and grand children by blackmailing us and getting Trillions of our dollars to repay their losses so they can stay afloat.
These massive loans and cash infusions will produce huge deficits that will be passed onto future generations.
Unfortunately, there is no bailout for the home owner, only half-hearted measures like loan modifications that do not solve the borrower's problems.
Look at the widely touted Hope for Homeowners rescue plan. It was projected to save 400,000 homeowners from foreclosure. Only 312 loans were modified. And we now know that over half of all borrowers who have had their mortgages modified have become delinquent again in less than 6 months.
Modifications are not the answer. Slashing the balance of the outstanding loans to 80% of the current market value of the property, like they did in the First Great Depression is a far more effective remedy as it sets up a payment level that the borrower can afford.
Therefore, in the absence of any willingness on the part of banks or government to bail them out, borrowers are left to defend themselves against the unscrupulous banks. It is really a case of financial self defense. You know where the banks are coming from, it is up to you to fight them.
It is enough that most of these troubled borrowers, especially the 15 million or so who are "Underwater," who owe more than their house is worth, will lose their homes one way or the other.
That is their punishment for taking out a loan without having the advice of a financial professional or being represented at closing by their own lawyer; not the mortgage broker's or real estate broker's lawyer, at the closing.
But it should not mean that they have to ravish their life savings, retirement accounts or their children's inheritance to placate the bloodthirsty banks.
As an experienced real estate investor, former bank loan officer and Personal Financial Coach providing assisting troubled home owners, I have many people in this situation.
My advice to them is to stop paying their mortgage, do not give the banks one more cent of their hard earned money.
We then show them how to remain in their homes for up to two years or so without paying a penny to the banks so that they can accumulate some money to get a fresh start. In some cases, the banks pay my clients thousands of dollars to leave the premises.
What about the eventual foreclosure? Won't it hurt their credit?
Yes it will, but they would be in the same situation credit wise when they eventually lost their homes.
Their choice is to be evicted from their home penniless, after going through their life savings or with the savings intact and a few dollars to move on with.
Also, when the dust settles, they will be able to buy a house for less than half of what they paid for the one they lost, according to knowledgeable experts.
If the banks and their proxies in government will not bail out the home owner, he must bail himself out, period.
Copyright 2008 Bill Young. Bill is a Personal Financial Coach. You can sign up for a free, year long course with Bill in How to Solve Your Money Problems here: http://HowtoSolveYourMoneyProblems.Com
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