Archive - Oct 2010

The saga of Park Avenue Bank's Charles Antonucci is over. The bank president who on March 15 was arrested on charges of engaging in a broad range of illegal conduct that
contributed, in part, to the bank's demise, but most importantly to stealing $11 million from TARP. Well, tonight the FBI has just announced that Antonucci has formally admitted to and pled guilty to securities fraud relating
to his attempt to fraudulently obtain more than $11
million worth of taxpayer rescue funds from the Troubled Asset
Relief Program ("TARP"), bank bribery, embezzlement of bank
funds, and participating in a $37.5 million scheme that left an
Oklahoma insurance company in receivership. Then again, this is what every other CEO in America is guilty of every single day. Which means that only thing Antonucci really pled guilty to was being a stupid enough to keep Park Avenue Bank Too Small To Succeed. As we all know the TBTF curtain is the only alibi all the other criminals in the industry resort to when the congressional theater convenes. Moral of the story: unless you can threaten the world with collapse, you will go to jail. And the penalty for this magnitude of stupidity is death: "Antonucci, 59, faces a maximum sentence of 135 years in
prison on the charges to which he pled guilty. He is scheduled
to be sentenced by the U.S. District Judge Naomi Buchwald on
April 8, 2011." So one down, and only about a million more to go... But not before they all collect the $144 billion in bonuses they have worked so to destroy shareholder value for this entire year (or so we can dream).

The first thing to know about junior resource exploration stocks is that they are volatile. You can make 50% in a day, and you can lose 50% in a day. This is due largely to the fact that they tend to be thinly traded. Thus, a whiff of good news, or bad, can overwhelm opposing trades. In the absence of a countervailing bid, the stock can move sharply until it reaches the point that someone is willing to step up and take the other side of the trade. If the news is bad and there’s no bid, things get ugly really quickly. Conversely, if the news is good – for example, the recent case of the AuEx buy-out – the volume of buyers rushing to get a hold of stock can blow the proverbial doors off.

How much can we blame on state pensions?

Seat belts on please.

Yesterday, Citigroup's homebuilding team hosted a call with investors in which the guest speaker was Adam Levitin, an associate professor of law at Georgetown University. Far from providing the "all green" call participants had desired, Levitin said that what we have recently seen and heard in the news is “just the tip of the iceberg” and that the foreclosure halt may well cause a "systemic problem", as was suggested on Zero Hedge when the news of the Florida's court involvement was first made public (here and here) a month ago. And since by now everyone knows what the key tension points in this potentially massive development are, we will cut straight to Levitin's somewhat unpleasant conclusions: "Our speaker predicted that more and more lenders are likely to stop their foreclosure processes in both judicial and non-judicial states. He also expects more states’ attorney generals to get involved. At the federal level, it is possible than banking regulators might step in as there is legal and reputational risk for the banks involved. Ultimately, if these issues do in fact escalate, the Administration may try to broker some sort of settlement. If such deal brokering does take place, Levitin believes that “some payment” will be exacted from the lenders and servicers. The Administration could bargain for more mortgage principal write downs." In other words, the endgame will likely end up being the extraction of material concession from the banking syndicate, in the form of systemic mortgage writedowns, with Obama's blessing, which will likely put the 25% of homeowners who are underwater on equal footing with the other 75%. It may turn out that this was the plan all along. And people naively wonder why banks have hundreds of billions in cash stashed on the sidelines...

Has the foreclosure scandal taken its first commercial real estate casualty: tomorrow's foreclosure auction of bankrupt Stuyvesant Town (which will sell for less than half its cost) has been postponed, without any specific reason, leading some to believe that the residential title scandal may have spilled over into CMBS land. From Reuters: "A foreclosure auction of Stuyvesant Town/Peter Cooper Village, the massive Manhattan apartment complex that may be worth less than half what it was just three years ago, was postponed on Tuesday for the second time this month. CWCapital Asset Management, which represents the bondholders who own the $3 billion mortgage on the property, declined to say why the auction had been delayed until Oct. 22 from Oct. 13. It was originally scheduled for Oct. 4." To be sure, this is the second time the auction has been delayed so it may be completely unrelated to what is currently the main topic in the mainstream media, although god's propensity to play dice has been previously characterized best by one Albert Einstein.

Wondering if you are one of those suckers paying a mortgage in limbo, with all the payments due to some non-existent mortgage noteholder getting retained at the servicer banks? Well, if you can spare 3 minutes then "Where's the Note" is for you. The website, which is on the verge of a viral break out, has a simple message: "Whether you are facing foreclosure, have an underwater mortgage,
or are just a concerned homeowner, it’s important that you contact your
bank and demand to see the original note on your mortgage. It only takes a few minutes using our free online tool." Quick, simple and easy. And in a few days your mortgage bank will have no choice but to tell you if they do in fact have your original mortgage note. And if not - welcome to cost-free living, courtesy of MERS and millions of rushed and fraudulent mortgage note assignments. Yes, it will mean the end of the GSEs, but it will also mean the accelerated write downs on thousands of MBS tranches which will rapidly collapse into insolvency (there is only so much Mark to Unicorn can cover up) and eventually take the insolvent TBTFs banks with them.

Look inside for details.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 12/10/10

The fed is probably the most morally "flexible" central bank ever, I will leave it there and that is about the most polite statement one can make. After serving us last winter concerns about asset bubble creation, dangers of building up expectations when it comes to rates policy, and the need to keep the market on its toes, we have now entered a phase when the Fed instead alley-oops every batch of bond purchases to the market in advance to make sure it doesn't dip while they reload. It's plain pathetic. - Nic Lenoir

Goldman Sachs' response to the FOMC: "Minutes of Sep 21 meeting confirm that FOMC was dissatisfied with the performance of the US economy even though most did not expect either renewed recession or deflation. The committee considered a range of options, focusing on Treasury purchases but including the possibility of adopting target paths for either prices or nominal GDP. Most participants appear to have thought that the status quo would justify renewed easing relatively soon, but a few thought more weakening would be required." Spot on Jan - now please ask the Spear Leeds boys if they can please invert every single input function in REDI, so that Buy is Sell, and people can at least pretend they are Selling on bad news, and vice versa...

Even as everyone in America seems to have anywhere between 2 and 4 opinions on Fraudclosure now that the topic is firmly planted in the MSM newsflow, things in Europe are not looking any better, even though most people there shun McMansions for their grandmothers' houses. Enter France, where an ongoing national strike (into its fourth day) was just extended by another 24 hours, and 3,500,000 people seem to have no interest in returning to work with any sense of urgency. Apparently the severity and penetration of the strike is much greater than (under)reported on US media, as seen by the following email from Goldman's Natacha Valla to clients, which explains why things may soon turn much worse.

Now that the Fed is officially targeting a path for the level of nominal gross domestic product, which is essentially the politburo's chief central planning task, and is just one step removed from what China does constantly by starting with a GDP assumption and trickling it down through the economy, it is only fitting that America, now on the verge of being a fully-blown communist country, is also abrogating property rights, courtesy of the much discussed foreclosure scandal. Dylan Ratigan provides a concise explanation of just how our bankers have managed to bring us to this last descent into central planning hell.

There are still huge headwinds facing the residential real estate market. Shadow Inventory is not getting better, and now we have the robo-signing scandal which will only further delay recovery. Since all real estate is "local", some markets are clearly starting to find a floor. But a "recovery" whereby prices stabilize is a couple years away.

BN  *AG CUOMO EXPANDS PROBE OF NEW YORK FORECLOSURE ACTIONS
BN  *CUOMO DEMANDS INFORMATION FROM BANK OF AMERICA, WELLS FARGO
BN  *CUOMO DEMANDS INFORMATION FROM WELLS FARGO, GMAC MORTGAGE/ALLY
BN  *AG CUOMO ALSO CALLS FOR SUSPENSION OF SOME FORECLOSURES
BN  *CUOMO CALLS FOR SUSPENSION OF SERVICERS ENGAGED IN ROBO-SIGNING

Well, come on, the guy is running for some political office somewhere.

Because, like, the Fed shockingly did not say it would not monetize debt ever again, here is today's case of FX intervention courtesy not of China, but the trading floor at 33 Liberty. If only that USD-CNY peg did not mean that Bernanke's assassination of the dollar also would lead to a destruction of the renminbi...