Guest Post: Why Is the White House Against Freezing Foreclosures? A Look At The Fed's Suddenly Worthless Trillions In MBS Holdings

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Thu, 10/14/2010 - 15:51 | 650444 Gully Foyle
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Because it is BEFORE the election.

Give it a month.

Thu, 10/14/2010 - 16:03 | 650512 midtowng
midtowng's picture

Washington will do nothing about this before January, and by that time the full effects will be on us.

I had forgotten that the Fed owns $1.5 Trillion of this shit (and counting).

Fri, 10/15/2010 - 00:15 | 651847 djrichard
djrichard's picture

I had forgotten that the Fed owns $1.5 Trillion of this shit (and counting).

Yes, can you imagine the anguish after they risked $1.5T of their hard earned money on this "shit".  It must have taken them forever to collect that $1.5T after loaning it out after they created it out of thin air.  Or if they were impatient, they may have just cut to the chase and loaned it to themselves (after printing it) - but still, I'm sure we can all feel their pain.

To the Fed, "this shit" is worth more than the $1.5T they created out of thin air.  They swapped paper notes for assets.  How can they lose?  They could care less about pushing it back on the banks, unless there's a better swap to be made down the road with that play. [Edit: At the end of the day, the Fed doesn't want its counterfeit issue back.  It wants the assets that were collatoralized against its counterfeit issue.]

Otherwise, they'll play us taxpayers for stupid rubes as usual and add any "losses" they incur on the assets as increased debts we need to work off.  To compensate them for all the risks they took you see.  What a sick joke they perpetrate on us.

Thu, 10/14/2010 - 16:06 | 650524 1100-TACTICAL-12
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Squatters on the DR show...

Thu, 10/14/2010 - 15:52 | 650447 Reishi-self
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By: Edward Thomas, Executor of the


h/t to David Clarence



Thu, 10/14/2010 - 15:52 | 650449 NOTW777
NOTW777's picture

its election time

Thu, 10/14/2010 - 15:53 | 650454 Sophist Economicus
Sophist Economicus's picture

They aren't worthless!  

Many Danielle, Jims and their baseball team sized families will have $1,000,000 home to live in now, along with the $300K worth of furnishings/other neat stuff...You cannot put a price tag on the look of joy on those 11 smiling faces

This is the stuff dreams are made of....


Thanks Uncle Bennie

Thu, 10/14/2010 - 16:22 | 650597 uno
uno's picture

Very well worded.

Thu, 10/14/2010 - 23:46 | 651816 Pants McPants
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Thu, 10/14/2010 - 16:05 | 650455 Bob
Bob's picture

Sounds like the Private Fed's argument that they must be "above the reach of politics" should now be honored . . . too bad it's not in their interests and against everyone else's this time. 

As for the toxic mortgages at the GSE's, according to Ratigan and others many of these were "purchased" by the GSE's from the banksters on the condition that they were "conforming" assets.  Since cursory examination will reveal that they don't conform to the basic conditions under which they were aquired, they should be returned to those banks. 

As ye sow shit, so shall ye eat.  It's time for the banks to gorge themselves, however unhappily, upon the toxic shit they created. 

Thu, 10/14/2010 - 16:22 | 650575 FEDbuster
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The banksters turned the FED into a ginormous zombie, cesspool bank.  Since member banks own and control the FED this wasn't hard to do.  The FED controls the government, so they demanded (ordered) the Treasury to back stop all the crap that was dumped on them.  In the meantime they pulled a couple of trillion out of their ass to give to member banks, so that the year end bounus pools would remain full.  Now they are trying to convert crappy MBS into questionable T-bonds.  The FED will NEVER turn on their owners (member banks) who dumped the crap on them in the first place. 

The first rule of plumbing is "shit flows downhill",  the hill looks like this: Banksters on top, FED below them, Federal government below them, State governments below them, citizens are at the bottom of the hill working hard to keep from drowning in the shit.

Headline at Yahoo, nuff said:

Wall St blames homeowners in foreclosure fiasco

Thu, 10/14/2010 - 16:28 | 650634 Bob
Bob's picture

Let them throw all the shit they've got and we'll see whose Wall it sticks to. 

Thu, 10/14/2010 - 16:54 | 650709 Miles Kendig
Miles Kendig's picture

Of course.  All dope dealers say they wouldn't be in the business if there weren't addicts.  Only in this case it's an addiction to an ownership, strike that, a debt society since even the banks cannot prove ownership under the weight of their, and governing societies epic ineptitude.

Thu, 10/14/2010 - 17:45 | 650865 Goldilocks
Goldilocks's picture

... gorge themselves ... upon the toxic shit they created.

Wishful thinking, but that was never the plan. We can sure hope though. In the meantime vote for it by buying gold … make the bankers bleed out their ‘real’ assets.


Thu, 10/14/2010 - 18:13 | 650933 FEDbuster
FEDbuster's picture

"It's time for the banks to gorge themselves, however unhappily, upon the toxic shit they created"

It's just a wafer thin MBS.....

Thu, 10/14/2010 - 18:42 | 651026 Bob
Bob's picture

An elegantly apt depiction!

Thu, 10/14/2010 - 15:53 | 650456 frankTHE COIN
frankTHE COIN's picture

I once worked for 3 Wall St firms that blew up and went under. Refco being one of them. I feel like that guy in the Snoopy cartoon with the rainy clouds always over his head.

Next stop, i'm going to apply as an intern at the FED.

Thu, 10/14/2010 - 16:37 | 650684 Apocalicious
Apocalicious's picture

I feel like a mere piker with only 2 defunct clown-shops on my resume. Hail to thee, frank!

Thu, 10/14/2010 - 15:54 | 650465 Silver-Is-Better
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Is there not anyone in this administration with even half a brain?

Thu, 10/14/2010 - 15:57 | 650479 Sophist Economicus
Sophist Economicus's picture

No!   But there are rumors of a head with a fully developed Medulla roaming the halls of the white house

Thu, 10/14/2010 - 18:36 | 651009 Winston Smith 2009
Winston Smith 2009's picture

No, they rent their brains from the people who finance their reelection.

Thu, 10/14/2010 - 15:56 | 650474 wiskeyrunner
wiskeyrunner's picture

Stock index futures will rise tonight.....MAKE FREE MONEY....BUY THE CLOSE SELL THE OPEN....I think Google reports that should be good for 100 Dow points overnight.

Thu, 10/14/2010 - 15:56 | 650475 Cammy Le Flage
Cammy Le Flage's picture

The "number of foreclosures filed by month" being reported are dead wrong.  100,000 countrywide last month.  LIE.

Look, Miami-Dade County Clerk of Courts has a page for foreclosure filing nos.  Lots of Clerks of Courts do.   Miami lists the nos since is the page   3,206 were filed last month in Miami-Dade County alone.  There are 67 counties in Florida.....let's not forget CA, AZ, NV, etc.   100,000/month?  I cry b.s.   Let's just assume 1,000/month are being filed in each county in Florida.  That is 67,000.   Why is no one reporting the nos. lies??????
Thu, 10/14/2010 - 23:31 | 651778 RockyRacoon
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There are some really desolate and empty counties in Florida.  They are not all like Dade County!  But your numbers are still probably not arguable nationwide.

Thu, 10/14/2010 - 15:57 | 650480 Turd Ferguson
Turd Ferguson's picture

Now THAT is an impressive. late-day ramp job.

Seems no one...and I mean no one...wants to be short ahead of two straight POMO days!

Thu, 10/14/2010 - 16:03 | 650482 Mako
Mako's picture

I fail to see why anything should stop.  That is what the court is for and process. 

The issue of "standing" or lack of can easily be addressed by the homeowner in the correct forum. 

The law is a severe, severable, separable and prejudicial force.

Thu, 10/14/2010 - 15:57 | 650484 John McCloy
John McCloy's picture

  Think we may have finally reached the point where the Fed is now near powerless to prevent what is coming. States rights will allow for the moratorium and the Fed is powerless to prevent that even as they try to quell the panic by intervening in the stock market but when it is determined that the Fed cannot prevent a housing collapse the markets will crash and we have ball game. Just look at the attempts today to keep the market cool ..not gonna work for too much longer. 

It is too lucrative to short and entirely too risky to stay long.Meanwhile Liberty tries to spin the plates with a close green god bless them.

Thu, 10/14/2010 - 16:11 | 650543 DonutBoy
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Thu, 10/14/2010 - 16:24 | 650610 mikla
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Thu, 10/14/2010 - 16:27 | 650625 MachoMan
MachoMan's picture

states rights do not allow for a blanket moratorium...  they have to narrowly tailor the law so as to allow those persons with the proper paperwork in order to foreclose.  Essentially, these laws are already on the books...

It's called "we want to draw attention away from the fact that we have no ability nor desire to actively police these instruments and are generally completely inept and hold ceremonial positions within the state."

Thu, 10/14/2010 - 16:48 | 650740 MuadDib
MuadDib's picture

It's not just the Fed that is loaded with toxic garbage, so too is the Federal govt in addition to the backstops and gurantees through the FDIC and the GSEs.

What we have here is a scenario for hyperinflation -- a total loss of faith in the currency.

The market could easily *skyrocket* in nominal terms, if Zimbabwe is any example.  Afterall, all of the money in US paper will have to flow somewhere.  Gold and silver to infinity in nominal terms and significantly higher in real terms.

Thu, 10/14/2010 - 17:12 | 650781 B9K9
B9K9's picture


A deflationary collapse was always the predictable outcome. There are just too many structural impediments - state's rights being one of them - to solve these broad issues at a federal level.

Ben, Timmy, Hank, the whole lot of them, knew the only possible way out was to re-blow another bubble, anywhere and at almost any price before this shit pile caught up with everyone. The intention was always targeted at rolling the paper to cover up the sins of the past.

They had their two years to pull off a miracle - it's all over. The recent jaw boning about QE2 is nothing more than crazy mumblngs, similar to Hitler ordering out 'phantom divisions' during his final days in the bunker.

Fri, 10/15/2010 - 14:02 | 653455 MachoMan
MachoMan's picture

You're far too generous, the FED never had the tools/capacity to fix the problem...  and its/treasury's efforts to do so were nothing less than golden parachutes for the principal actors of this whole mess.

Thu, 10/14/2010 - 15:58 | 650486 Duuude
Duuude's picture



Aaaaand the FDIC was gonna pay them



"Don't go thinking that banks are getting the short end of the stick on this deal.  It is, as always, the little guy, and, of course, his next door neighbor who just lost $150,000 in equity because of the low price fever confronting the real estate market in many states. Unfortuneately, we do not know at this time which banks have Shared Loss Agreements in place with the FDIC. We do know the profits realized by OneWest is only the tip of the iceberg. Your local 'big bank' will celebrate behind closed doors as 'we the people' continue to give them our money! Who do you think the banks are that hold the other 93%?"



Thu, 10/14/2010 - 15:58 | 650487 Dr. No
Dr. No's picture

Thats one way to shrink the balance sheet.  If Bernake doesnt want to do it, the market will!!

Thu, 10/14/2010 - 16:21 | 650590 csmith
csmith's picture

Bennie has $1.5T in MBS (@par) and $55B in equity. Therefore a 3.7% haircut wipes out the equity line.


Thu, 10/14/2010 - 15:58 | 650489 Turd Ferguson
Turd Ferguson's picture

Two minutes to go. Down down 9. Can they make it? Brian Williams desperately wants to report that "on Wall Street today, stocks closed slightly higher".

Thu, 10/14/2010 - 15:59 | 650494 LibertyIn2010
LibertyIn2010's picture

How about we give them a taste of their own medicine?  Let's give them the ol' Dick Fuld treatment. 

Sorry, Ben, but we're not going to save the Fed.  Instead, we're going to break it up and sell it off for whatever it's worth on the open market. 

Payback, bitchez! 

Thu, 10/14/2010 - 16:08 | 650535 Bob
Bob's picture

No more free lunch. 

Fri, 10/15/2010 - 14:07 | 653480 MachoMan
MachoMan's picture

we're going to break it up and sell it off for whatever it's worth on the open market.

Fail.  Go to the back of the class.  The "market" clearing price for these assets will be literally nothing, but given the volume, the only persons with enough wherewithal to foot the tab are either other sovereigns (who would be left standing?) or the principal actors of this mess (the beneficiaries of the wealth gap).  Remember, they'll be sold en masse, behind closed doors...  think what happens to the sale of banks...  if you sold each individual security on its own, you might get a vastly higher price...  but that's not efficient, hence giant haircuts and the introduction of the possibility for profit/fiefdom.

This was baked in from the start...  we bought it hook line and sinker.

Thu, 10/14/2010 - 15:59 | 650495 Ragnarok
Ragnarok's picture

The free-market, let the banks do what they do mentality was what allowed them to create a $14 trillion mountain of securities backed by precarious mortgages to begin with.


NO, corruption did.

Thu, 10/14/2010 - 23:53 | 651833 Pants McPants
Pants McPants's picture

Yes.  The distinction between a free market and corruption cannot be repeated often enough.


Sadly the overwhelming majority have been taught to lump the two together.

Fri, 10/15/2010 - 14:09 | 653494 MachoMan
MachoMan's picture

just spitballing here, but maybe it's because the inevitable conclusion of representative democracy + mixed capitalism is farcism.  In other words, it's not necessarily very presumptuous.

Thu, 10/14/2010 - 16:00 | 650500 Dr. No
Dr. No's picture

Come to think about it, the MBS will be like the FEDs gold.  Perminatly valued (i.e. $42.xx/oz) and unaudited.  Perhaps they will lease out the MBSes?

Thu, 10/14/2010 - 16:17 | 650567 VegasBD
VegasBD's picture

HA! Love it.

Thu, 10/14/2010 - 16:01 | 650503 Raptor.Handler
Raptor.Handler's picture

What a convoluted mess.

Thu, 10/14/2010 - 16:01 | 650507 Turd Ferguson
Turd Ferguson's picture

So close... -2.19

Heads should roll on this one. How could this be allowed????

Oops spoke too soon -1.89

Thu, 10/14/2010 - 16:04 | 650517 HelluvaEngineer
HelluvaEngineer's picture

No one even cares how obvious the invisible hand is now...

Thu, 10/14/2010 - 18:10 | 650931 Cognitive Dissonance
Cognitive Dissonance's picture

Which is a sign of either arrogance or desperation.

Thu, 10/14/2010 - 18:52 | 651052 deadhead
deadhead's picture

It's desperation, my good friend CD!


It is desperation.  I think I see small beads of perspiration beginning to form as the arrogance wanes and the panic takes hold, once again.

The Fed has threatened to use Paulson's bazooka yet again and at this point in time has painted itself into a corner for the Nov 2/3 coffee klatch.  They will fire it, in my view, and then find that the arsenal is bare.


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