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Will The $426 Billion "Second Lien Monster" Require A New Marshall Plan For Housing? Reuters Special Report On Fraudclosure

Tyler Durden's picture





 

Reuters' Matt Goldstein has completed a special report on foreclosure fraud, asking rhetorically: "foreclosures are rising; lawsuits are flying; banks are beleaguered; there has to be a better way?" Goldstein looks at fraudclosure from the perspective of the fight between junior and senior liens, a topic Zero Hedge discussed a month ago (The Foreclosure Mess MBS Hate Triangle Emerges: Junior Versus Senior Bondholders Versus Servicers) highlighting that $426 billion in loans are second lien, and, as highlighted previously, sit on the balance sheets of BofA, JPM, Wells and Citi in the biggest circle jerk in this whole mortgage crisis fiasco (always remember: one TBTF's mismarked assets always end up being another TBTF's unfudgeable liabilities). As the chart below shows, the banks have no choice but to come up with a compromise: obstinately keeping their heads in the sand is a guaranteed way for the entire financial system to blow up.

Which is why Goldstein asks what are the alternatives to resolve this problem. Six potential proposal have emerged: A Camp David summit, Second lien writedowns, Regulatory easing, Big Refi, Bond investors deal, and a Borrowers compromise. At the end of the day none of these solve all the problems, and all go through the perspective of a TARP 2-type intervention for the banks. Which means that Obama will have to make a decision whether or not to impair the equity and senior debtholders again. And if the president once again sides exclusively with the banks, that will certainly be the tipping point in US populist anger.

At the end of the day, DoubleLine Portfolio Manager Vincent Fiorillo, may be right, and what may be called for is the same type of multilateral bail out costing trillions of dollars in inflation adjusted terms that was the "Marshall Plan."

“No one wants to put the banks in an untenable situation,” said Vincent Fiorillo, a mortgage-backed security trader and portfolio manager with Los Angeles-based DoubleLine Capital. “If the choice is between getting something, I think that as a  fiduciary getting something would be my first choice.” Fiorillo said it may ultimately take some third party to bring all the sides together and hammer out a “Marshall Plan for the mortgage business.”

Perhaps the unwillingness of various  actors who do have much to lose by escalating the issue is one reason why they have so far been unwilling to enjoin de facto monopolists such as Pimco and the New York Fed to pursue aggressive putbacks. Of course, the status quo is most agreeable to all market participants. The problem is what happens when the cash runs completely dry from the simple flesh and blood securities that are at the basis of every MBS. And that's why we soon may truly need a Marshall Plan, the type that is more than a metaphor and is a full fledged wholesale rescue of a crushed entity. Only this time instead of rescuing a continent beleaguered by the ravages of the biggest war in history, it will be the US housing sector, ravaged by what is becoming perceived as the biggest and most pervasive mortgage fraud in history.

Full Reuters must read special report.

 


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Fri, 10/29/2010 - 16:45 | Link to Comment doolittlegeorge
doolittlegeorge's picture

better way?  we've already been led down "the primrose path."  this is the purpose and always has been for "too big to fail."  are we at the "don't worry a federal agency will now be in charge of that" moment?  State AG's have been "looking to cut a deal" since day one.  pretty big tho...even for the Federale's.  Solutions look messy.

Sat, 10/30/2010 - 07:50 | Link to Comment Popo
Popo's picture

Well the first steps are*clearly* to wipe out the equity holders, replace management, bring criminal convictions to bear and convert debt to equity.   

WTF is so goddamn hard to understand about the straightforward, legal approach?

Resolution authority ALREADY EXISTS under Dodd Frank.   We don't need a new set of laws, we need someone, anyone, in office with a functioning set of balls.

The second step should be to immediately re-instate Glass Steagal AS ORIGINALLY WRITTEN - WITHOUT CHANGES.

 

This is not complicated.  It will be painful, and it will result in a large portion of the banking elite becoming non-elite.  And the criminal charges will also likely result in a significant number of said former-elite going to jail.  Any other solution involves the obliteration of democracy, capitalism and free-society.  

Sat, 10/30/2010 - 10:22 | Link to Comment johngaltfla
johngaltfla's picture

What we need is for the enforcement of and allowance of contract law to be completed. The problem is that while the law might apply to the single investor or single homeowner, the banksters have no such obligation until someone bigger comes along (hint: putbacks) and stomps them in the courts. The biggest joke is FASB and CONgress which through Voodoo Accounting is allowing the banks to hold second liens on the books at full value even when the underlying properties have a negative net valuation to the original mortgage and the homeowner is no longer servicing either the primary or secondary liens.

Until we fix those issues this problem is only going to expand exponentially.

Fri, 10/29/2010 - 16:45 | Link to Comment Bob
Bob's picture

"No one wants to put the banks in an untenable position?"

Hello?  There are some sane people who want nothing less than to resolve these monsters for good. 

Fri, 10/29/2010 - 16:48 | Link to Comment NOTW777
NOTW777's picture

what about the untenable position of the average american being abused by his or her government

Fri, 10/29/2010 - 16:53 | Link to Comment Bob
Bob's picture

That's exactly my point.  We have enough trouble with the government without being drained for the banksters.  BK for the banks. 

BTW, we need to block issuance of that $144B in bonuses that are now clearly illegal sacking of corporate assets. 

 

Fri, 10/29/2010 - 17:01 | Link to Comment TuesdayBen
TuesdayBen's picture

I'm so friggin pissed that it wasn't BK from Day One.

Fri, 10/29/2010 - 17:10 | Link to Comment Bob
Bob's picture

We need to block issuance of the $144B in bonuses that are now clearly illegal sacking of corporate assets with BK's on the horizon. 

Fri, 10/29/2010 - 17:40 | Link to Comment deadparrot
deadparrot's picture

What do you think the suspension of FASB 157 is? It lets banks pretend they are solvent for long enough to pay out one last round of insane bonuses. Add in the fact that loan loss provisions are being cut to improve "performance" leads me to believe that as soon as said bonuses have been paid in 2011, bank execs will be toasting their good fortune, in first class, on a one-way flight to Venezuela.

Fri, 10/29/2010 - 18:07 | Link to Comment Bob
Bob's picture

Yes, but that inadequate loss provisioning can no longer be justified, even under "market myth" valuations.  This is a different matter.  Of course, it's obvious what they'll try to do . . . I'm hoping shareholders or plaintiffs in suits will move to legally block payments.  Of course, a government advisory would be helpful, but we know how likely that is.

Fri, 10/29/2010 - 22:50 | Link to Comment Fox Moulder
Fox Moulder's picture

The banks have put themselves into that position.

 

They better figure on Martial Law to go along with the Marshall Plan.

Sat, 10/30/2010 - 07:45 | Link to Comment Popo
Popo's picture

I would argue that a growing majority of Americans could give a fuck what happens to the banks.

We have resolution authority under Dodd Frank, we have the FDIC ... and by the way we also have RICO, which we will be ramming up your ass Mr. Dimon.

Fri, 10/29/2010 - 16:46 | Link to Comment Ragnarok
Ragnarok's picture

OT: Who are Canada's 'freemen'?

 

http://www.nationalpost.com/news/Canada+freemen/3748349/story.html

 

HAMILTON, ONT. • When Mika Rasila got pulled over by Niagara police in January for driving his white Pontiac Montana without licence plates, he was ready with a defence: he doesn’t need plates because he’s a Freeman on the Land.

A Freeman on the Land, he explained in a letter he tried to hand the patrol officer through the window, is someone who has revoked his consent to be governed. He has opted out of Canada so the laws don’t apply to him.

Fri, 10/29/2010 - 17:09 | Link to Comment Sean7k
Sean7k's picture

Woohoo! America's Freemen? Sounds almost....almost...American....Huh?

The article is a good read. The use of intentional slurs ( radicals, racists, right wing, conspiracy theory, etc) is pretty classic. 

Just why should you not be able to opt out? That there could be a sizeable population of people whom choose to not belong? The native americans have been given some freedom in this regard. Providing there is no criminal actions perpetrated versus a failure the pay fees and taxes or recognize US authority? Us citizens should have a reasonable expectation that their private property rights would be honored. Just as a Freeman's should be. 

What is the US afraid of? What we might choose?

Fri, 10/29/2010 - 18:10 | Link to Comment MachoMan
MachoMan's picture

If you opt out, you don't get to drive on the roads built by tax dollars...

Fri, 10/29/2010 - 18:21 | Link to Comment Sean7k
Sean7k's picture

Unless, in the interest of peaceful co-existence, you allow for neutral thoroughfares. Native Americans are allowed to use all roads. Would you rather have someone drive across people's property and then try to catch them ex post? If people join in, should they then block access through their property? It works both ways.  

Sat, 10/30/2010 - 10:14 | Link to Comment Imminent Crucible
Imminent Crucible's picture

Unless the Freeman is running his own fuel still, he's paying the taxes that build and maintain the roads--at the gas pump.  Every gallon of gas or diesel has both federal and state taxes built into the price.

Sat, 10/30/2010 - 10:45 | Link to Comment MachoMan
MachoMan's picture

The original point was that co-existence does not work.  Indians are allowed to co-exist because they have been stuffed into poverty laden reservations (essentially separate countries).  Essentially, this is the same thing we would have to do with dissenters of the state/"freemen".  There is no co-existence.  Either you join or you leave.  The infrastructure of the country has been built in such a way that you may not opt out.

If you want to go to some rural area and have no participation in modern society, then effectively you may get off the grid and opt out...  however, this is vastly more academic than practical.  In other words, the ability to "opt out" is available for only a few until a tipping point is reached and the government is overturned/becomes impotent.  This is not a reasonable concept.  There is no co-existence.

Look at it this way, what are the "free men" of ~mexican (american stereotyping +1) descent doing to our border states?  Use of schools and hospitals?  Payment of taxes?  The inevitable conclusion is that dependents of the state bankrupt it.  There is no co-existence.  The infrastructure has not been buit for anyone to be able to opt-out of paying for it.

Fri, 10/29/2010 - 18:37 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

wonder if you could bicycle or roller ski on these same roads, if you were a freeWOMAN?

Fri, 10/29/2010 - 23:14 | Link to Comment Bananamerican
Bananamerican's picture

no, but what if Jesus came down to wrestle a bear at the astrodome?

Would a freeman have a shot at scoring any tickets?

Fri, 10/29/2010 - 18:50 | Link to Comment Sean7k
Sean7k's picture

People have a real hard time with the concept of someone wanting to opt out. To choose to not be a part of this country. Why should that bother you so much?

People whom opt out are not asking for entitlements or services. They are not asking for protection. They are not asking for the freedom to hurt others or be criminals. 

Most people will choose to remain a part of the government- no matter what is instituted or made law. 

The problem in an ever expanded global population is this: you can no longer go somewhere else. The choice to obey or die is not much of a choice is it? However, if we are to acknowledge that human beings have a natural right to life, liberty and the pursuit of happiness; then the means of expressing those rights, when they do not conflict with other's, should be available to all humans, No?

Fri, 10/29/2010 - 23:05 | Link to Comment StychoKiller
StychoKiller's picture

Kinda sounds like the antithesis of the rationale for the Drug Prohibition laws:  If we make them legal, some mental defectives will CHOOSE WRONG, so we need the Nanny State to choose for them -- it's for your protection -- honest!

Sat, 10/30/2010 - 10:55 | Link to Comment MachoMan
MachoMan's picture

Yes, but in acknowledging those human rights, we must also accept property rights and authority of sovereigns...  in this case, the property rights of the state and its sovereignty to determine what occurs within its borders as well as the human rights of its citizenry to determine the same.  In other words, you can't be a freeman living in your mom's basement.  Neat in theory, impossible in execution given competing interests and inevitable conclusion (destruction of the state).

You can either have a state or you can have anarchy (freedom).  Take your pick (note: if you choose the latter, you will either be subjugated or booted, since you live in a state and it determines your responsibilities).

This is why when [insert crazy ass new england state] wanted to secede, it would need to defeat the united states armed forces in order to succeed.

You can hoe your own row, get off the grid, and not participate, but in the end, you'll be subject to all the same laws as me. 

Sat, 10/30/2010 - 12:10 | Link to Comment Sean7k
Sean7k's picture

Why do we have to accept them? Because you say so? What if those sovereigns are in violation of the contract they have with the people? The Constitution.

The superior standing of natural rights to tyranny was established by this country in 1776. Or did you forget?

Further, you assume false choices: destruction of the state and anarchy. If a crumb falls from a cake, does the entire cake fall apart? If the entire cake crumbles, was it a cake of any quality in the first place? I think not. Additionally, anarchy is a loaded word- it conjures uncertainty and destruction, when in reality- it merely means no government or liberty. You assume people cannot maintain a society without rigid controls and police power. Yet, you offer no argument  to validate your assumptions. People have lived  without governments in the past- the American Indian being a good example- they could do so in the future.

As for the legitimacy of the government- it is in violation of its' contract with us. The fourteenth amendment guarantees the equal treatment of all citizens ( and corporations have now been defined as citizens) and yet special classes are created for corporations with rights beyond those of the rest of us. When a contract is broken- it is null and void. 

The Federal Reserve Bank and its' members have been given opportunities and benefits beyond those extended to other citizens through fractional reserve banking. They have been allowed to create debt which we are responsible for even though we have no way of restricting their behavior- essentially taxation without representation. 

When the contract was voided, the ability to make law was voided as well- any action to enforce those laws are nothing but the actions of a totalitarian state. A criminal enterprise. Those that choose to support it are nothing, but accomplices.

Sat, 10/30/2010 - 18:26 | Link to Comment MachoMan
MachoMan's picture

The government will bear arms against you if you attempt to secede.  In the event you attempt to assert the government breached its contract with you, it will tell you to fuck off and keep paying your taxes.  Your only form of redress, as a non-citizen/freeman is to take arms against the state.  This is why there is no co-existence.  Either you win or the state wins.  The two posititions are mutually exclusive.  So, either secede or shut the fuck up.

Sat, 10/30/2010 - 22:38 | Link to Comment Sean7k
Sean7k's picture

You are quite the slave. Good luck with that.

Mon, 11/01/2010 - 10:03 | Link to Comment MachoMan
MachoMan's picture

We are both the slaves, only you haven't figured that out yet.  Stuffing feathers up your butt doesn't make you a chicken.

Even if you "opt out" of the system and go hole up in a cave in the rockies, ozarks, or appalachia, YOU ARE STILL SUBJECT TO THE LAWS, RULES, AND REGULATIONS OF THE SOVEREIGN STATE IN WHICH YOU LIVE.  The act of unilaterally declaring yourself a "freeman" is like unilaterally calling yourself something other than the name you have registered with the state...  in order to change your status, you will need approval from the state...  until then, you have no change in status despite your unilateral attempts.

And let's not even get started on expatriation...  good luck getting away with the money/tax avoidance.

In short, until you can successfully defeat the standing army of the federal government and all law enforcement in your particular state, you are advocating mysticism, religion, and naive hopes and dreams.  You were born into slavery and calling yourself a freeman does not change the owner on your title.  Your name is toby.

Fri, 10/29/2010 - 20:45 | Link to Comment chubbar
chubbar's picture

Only until they are privatized and turned into toll roads. Then it's just a rental deal and everyone, even freemen, get to travel on them (freechicks too).

Sat, 10/30/2010 - 10:56 | Link to Comment MachoMan
MachoMan's picture

Until the freemen figure out they can't pay the tolls and collectively bargain/impose state control of the roads to gain access...

Fri, 10/29/2010 - 20:42 | Link to Comment doolittlegeorge
doolittlegeorge's picture

love it!

Fri, 10/29/2010 - 16:48 | Link to Comment NOTW777
NOTW777's picture

heres an idea - be honest. quit telling the american public we are in a wonderful recovery and yobama has saved us.  tell the truth about wildly over priced RE and MBS, the banks insolvency and that the taxpayer is primarily the one being asked to pay the consequences

Fri, 10/29/2010 - 17:33 | Link to Comment Eternal Student
Eternal Student's picture

It strikes me that the Banks ARE telling the truth here, about this all being merely a paperwork issue.

What they mean is that all they need are a bunch of green papers from the Fed, and everything will be resolved.

Silly me for doubting them.

Fri, 10/29/2010 - 16:49 | Link to Comment RockyRacoon
RockyRacoon's picture

One more bank bailout will not be tolerated.  Try us and see.  Dare ya.

Fri, 10/29/2010 - 17:00 | Link to Comment plocequ1
plocequ1's picture

Dont talk like that, We are the taxpayer. We lick the boots of our owners when told. As far as a bailout though, I have no fucking money. Go redeem some other fortunite creature and leave me alone.

Fri, 10/29/2010 - 17:46 | Link to Comment Joe Davola
Joe Davola's picture

They've realized no one will happily give up more of their hard earned.  So they just print up a big bunch and make yours a worth a lot less.  Same outcome, just a lot harder for most to fathom.

Fri, 10/29/2010 - 23:15 | Link to Comment Bananamerican
Bananamerican's picture

succinct

Fri, 10/29/2010 - 17:01 | Link to Comment frankTHE COIN
frankTHE COIN's picture

Big Bank to RockyRacoon

" May i offer you a toaster "

Fri, 10/29/2010 - 17:03 | Link to Comment TuesdayBen
TuesdayBen's picture

Perhaps an AAPL product would go over better than a toaster.

Fri, 10/29/2010 - 21:20 | Link to Comment RockyRacoon
RockyRacoon's picture

Went to Sears to buy a toaster the other day and they offered me a bank as a premium.

Fri, 10/29/2010 - 23:08 | Link to Comment StychoKiller
StychoKiller's picture

I stand (well sit, actually!) before you, truly gobsmacked!  Well done, sir! :>D

Fri, 10/29/2010 - 17:27 | Link to Comment etrader
etrader's picture

"Try us and see. Dare ya."

Thats what Bank Holidays are for.

It avoids such unpleasantries. :>

Fri, 10/29/2010 - 18:01 | Link to Comment snakeboat
snakeboat's picture

Rock, I agree, but it'd be you and me and only a handful of others who are not at this point anesthetized by the TV and getting shit done who would even show up.  THAT is the problem.

Fri, 10/29/2010 - 21:22 | Link to Comment RockyRacoon
RockyRacoon's picture

That is not a problem actually.   Look how much damage one guy in a small plane did to an IRS building in Texas....

Fri, 10/29/2010 - 23:10 | Link to Comment StychoKiller
StychoKiller's picture

I'm bettin' a lot of barkeeps gonna have to bone up on their Molotov cocktail recipes!

Fri, 10/29/2010 - 16:55 | Link to Comment NOTW777
NOTW777's picture

wag the dog, wag the dog.

the same people who refuse to use the word terrorist are now setting up a command center and engaging in an hour long campaign er, press conference over an alleged, booby trap package

Fri, 10/29/2010 - 16:59 | Link to Comment Sudden Debt
Sudden Debt's picture

I find BIG REFI sounds pretty catchy.

THE BIG 2011 BIG REFI!

I'm telling you guys, there's a movie in that somewhere.

Fri, 10/29/2010 - 17:04 | Link to Comment frankTHE COIN
frankTHE COIN's picture

Procure the Worldwide rights and get me my muse!

Fri, 10/29/2010 - 17:08 | Link to Comment TuesdayBen
TuesdayBen's picture

Perhaps the Gubmint would do well to sell hyperinflation to the proletariat by characterizing it as  Supersizing The Economy.

Fri, 10/29/2010 - 20:50 | Link to Comment chubbar
chubbar's picture

I agree and here are the terms, 75% off of principle and 0% interest on a 30yr loan for everyone. The folks who own outright get a rebate. Fuck the banks and the PTB. Otherwise, let's bring it all down and see who survives.

Fri, 10/29/2010 - 23:49 | Link to Comment frankTHE COIN
frankTHE COIN's picture

Go Chubbar! Go Chubbar!

Fri, 10/29/2010 - 16:59 | Link to Comment MarketTruth
MarketTruth's picture

<s> But on CNBS said the MBS nightmare was only $200B or so. Are you telling me CNBC lies to their viewers?</s>

Fri, 10/29/2010 - 17:27 | Link to Comment Sudden Debt
Sudden Debt's picture

Take 5 roofies and drink one bottle of tequilla.

You'll be fine again tomorrow and won't remember a thing about this.

Fri, 10/29/2010 - 19:12 | Link to Comment MarketTruth
MarketTruth's picture

Can i just give A-Cup Erin a roofie and whore her out like the cheap stock market slut she is? i think Blankfien's little smeckle could use a polishing.

Fri, 10/29/2010 - 20:52 | Link to Comment chubbar
chubbar's picture

I thought she was a "b" cup, you telling me she's stuffing?

Fri, 10/29/2010 - 21:14 | Link to Comment Problem Is
Problem Is's picture

Moody's downgraded Mannish-Boy Burnett
She stuffs with China Lead Toys...

When you're the flat tom-boy amongst the legendary CNBC Stacked Anchorettes... You better come up with some sort of shtick...

Fri, 10/29/2010 - 22:10 | Link to Comment MarketTruth
MarketTruth's picture

Yes, her padded cups add another size up.

Fri, 10/29/2010 - 17:15 | Link to Comment bugs_
bugs_'s picture

marshall plan II sounds so much more positive than QE2

Fri, 10/29/2010 - 17:16 | Link to Comment Implicit simplicit
Implicit simplicit's picture

The more "quiet"  second mortgage default  doesn't result in foreclosure; bankrupties are increasing rapidly again.

 

http://usgovinfo.about.com/b/2009/08/19/bankruptcy-filings-still-increasing.htm

 

Fri, 10/29/2010 - 17:17 | Link to Comment tony bonn
tony bonn's picture

"And that's why we soon may truly need a Marshall Plan."

oh we don't need any plan or bailout....we have cds and other innovative financial instruments which have spread the risk and made the system safer and more stable. don't you guys know that there are nearly 1 quadrillion dollars in notional derivatives - surely enough to keep any risk from getting out of hand....remember how the subrime crisis only cost us 200 billion usd? see, there really is no problem...besides, when the quadrillion dollars comes into play, ben will bring his 1 trillion usd qe-743 to fix things. anyway, the cia will protect the american way of life.

Fri, 10/29/2010 - 17:22 | Link to Comment A Man without Q...
A Man without Qualities's picture

I just don't buy the idea that RMBS investors who were royally screwed by the banks are going to turn around and say, we don't want to take too much because we know how important it is to preserve your capital.  Basically, there is this noble ideal that we can provide help for the homeowner, compensate the bond investors, settle any unpaid state taxes all coming from the banks without another government bailout and preserving capital.  It will be a greater miracle than the feeding of the five thousand.

Fri, 10/29/2010 - 17:28 | Link to Comment Sean7k
Sean7k's picture

Let me see if I understand this: The banks loan money after doing a complete risk analysis. In case of failures, they are supposed to maintain a reserve. If the citizen does not do this in their everyday life- they are forced to file bankruptcy. 

Doesn't it make sense that a bank should as well. Is it not said by bankers, that people whom are irresponsible in their financial affairs must "pay the price" for their recklessness? How exactly is a bank any different?

I'm pretty sure if a citizen declares bankruptcy, the system will not fail. I'm pretty sure if a bank declares bankruptcy the system will not fail. However, what does it say if so many banks are in danger of failing it would take down the whole system? 

It tells me the entire system is bankrupt. That the entire system needs to fail and that we need one that is not based on Fractional Reserve Banking. What this author is encouraging is throwing good money after bad and just how smart would that be?

Fri, 10/29/2010 - 23:13 | Link to Comment StychoKiller
StychoKiller's picture

Rationality/Intelligence != Govt/Fed policy.  Answer to your last question:  NOT smart at all, in fact completely STUPID!

Sat, 10/30/2010 - 10:50 | Link to Comment Fearless Rick
Fearless Rick's picture

You have grabbed the bull firmly by the horns. With the Fed consuming all the excess MBS, it is the Fed that is bankrupt, except that they can magically just create more money out of thin air, which keeps them afloat.

The reality of the situation is that the government and its banking system are systemically insolvent. Assets owned by the people - individuals, small businesses, LLCs and corporations of all variety are the true measure of the wealth of our nation, not the debt-riddled systemic looting that's taken its place over the last 97 years (since the birth of the Monster from Jekyl Island).

American people must begin to take back what is rightfully theirs, and that begins with quiet title on millions of properties to which the banks have no legal title.

After that, we can begin to deal with the 536 looters in DC and their "entitlements." We WILL go back to a largely cash-based society, repudiate much of the debt (like any CCs carrying over 12% interest=USURY), and move forward. Gold, silver and tangible assets will be honored. Paper (fiat) will be - and already is being - shunned by many who know better.

Fri, 10/29/2010 - 18:17 | Link to Comment SwingForce
SwingForce's picture

This is basically a moot point, as many 2nd Liens are on riding piggy-back on underwater 1st mortgages. What does the chart "1st Lien Monster" look like? To answer the question asked yesterday regarding a "rational foreclosure resolution or preserve the capital structure of the banks", this article inadvertently shows that we can do NEITHER. The collateral is gone, when will these banks be forced to recognize this fact? 

QE is nothing more than a FREE Bailout for the banks- TARP was costly 5% preferred + Warrant extortion- Is Ben really about saving the banks at the sake of the USD? That's absurd, our economy cannot recover until a deal is made w/ underwater homeowners. The banks called their bluff and now the paperwork is blowing up in their faces, county courts are clogged, property taxes are not being paid, federal courts are seeing more bankruptcies filed, lawyers are padding $Billion$ on top of already onerous and unrecoverable debts. Write it down, start them paying again, they'll feel good about themselves. Write it down rather than QE- it will be cheaper, and oil won't go to $500/bbl.

Fri, 10/29/2010 - 23:15 | Link to Comment StychoKiller
StychoKiller's picture

The US will do the right thing, after they've tried everything else. -- W. Churchill

Fri, 10/29/2010 - 18:34 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

Marshall Plan”  bitchez†

Fri, 10/29/2010 - 20:44 | Link to Comment doolittlegeorge
doolittlegeorge's picture

That would be "General Marshall" to you.

Fri, 10/29/2010 - 19:24 | Link to Comment Miles Kendig
Miles Kendig's picture

One way or another the issues surrounding RRE/CRE will be resolved.

Fri, 10/29/2010 - 19:57 | Link to Comment Buck Johnson
Buck Johnson's picture

Yea, this version of the Marshall plan will be people staying in their houses and/or getting their mortgage drastically reduced.  But the price will be bad inflation and possible state and federal govt. cuts in services and benefits.

Fri, 10/29/2010 - 20:46 | Link to Comment SwingForce
SwingForce's picture

Hi friend, I'm new here. As I stated above, The Marshall Plan for 1st Liens would save the country from QE and "bad inflation", plus property taxes would be paid hopefully avoiding the cuts in services you mention.

I understand this backstrokes your nerves, but ponder this: If the situation is handled in One Fell Swoop it would work. If it continues as is for the next 5+ years, everyone loses. EVERYONE ELSE, that is. Not the deadbeats (they've already lost!).

Fri, 10/29/2010 - 21:27 | Link to Comment RockyRacoon
RockyRacoon's picture

Hello and welcome.  I think you may be focusing on peripheral issues.  Just think along the lines of how to progress in the complete looting of the treasury and the citizens and you'll have the scenario that will be more valid.  As long as there is one last dollar to extort the Fed will continue.  If one could work out a trade for that he could make a fortune.  

Fri, 10/29/2010 - 20:48 | Link to Comment doolittlegeorge
doolittlegeorge's picture

Two words:  "debt forgiveness."  One way or another "it's coming" if not "upon us already."  "Hey, man.  Somebody has to pay taxes" and "we can't do that if they're in debt" right?  So "take the shit off the balance sheet of the banks AND the homeowner."  It's not like there's any new issuance, right?  And "what little there is comes from the government itself." Right?

Fri, 10/29/2010 - 20:55 | Link to Comment SwingForce
SwingForce's picture

I downloaded the original report, and find the numbers differ drastically from Laurie Goodman's from Amhurst (see page 15) http://www.aei.org/docLib/Zimmerman.pdf

Full Video: http://www.aei.org/event/100297

Fri, 10/29/2010 - 21:38 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

"...we soon may truly need a Marshall Plan, the type that is more than a metaphor and is a full fledged wholesale rescue of a crushed entity."

Are you kidding me?  A Marshall Plan?  What we need is an organized bankruptcy.  Yes, there will be pain, which explains "...the unwillingness of various actors who do have much to lose..." to go that route.  But bankruptcy eliminates the bleeding from the bad assets by getting rid of the bad assets (or marking them down to the point where the bleeding stops).  The good assets remain and become a foundation for a new start with new managers.   And that's really the key point:  bankruptcy removes the remaining good assets from the control of those with a demonstrated incapacity for handling them responsibly.

Fri, 10/29/2010 - 22:22 | Link to Comment f16hoser
f16hoser's picture

But wait, we've already thrown close to a trillion dollars to the TBTF's. We can't let them sink now! I love it. Banksters with help from politicians get us to once again throw good money (laugh) at bad. Whats another 2-4 trillion? Eventually politicians won't be able to "kick the can" any more. IT'S TOO DAMN BIG! I wish Obummer and his cronies would just hyperinflate the USA away once and for all. The suspense is killing me. 

Fri, 10/29/2010 - 22:42 | Link to Comment doolittlegeorge
doolittlegeorge's picture

i must say "it is a temptation to want the HI as well."  true crime indeed.  "no higher form of dishonesty leading to truth"?

Fri, 10/29/2010 - 23:18 | Link to Comment StychoKiller
StychoKiller's picture

The phrase "throwing good FRNs after bad", springs to mind. :(

Sat, 10/30/2010 - 10:32 | Link to Comment Downtoolong
Downtoolong's picture

Debt can’t be wiped out. Until it is paid off by someone, it can only be transferred. Ultimately all these QE stimulus and monetary expansion programs amount to taking the debt of those who can’t pay it off, consolidating it at the government level, and then re-distributing the debt to those who can pay it off. Whether the debtor being bailed out is a bunch of corrupt bankers or irresponsible consumers, that’s simply not fair to everyone else.

 

I for one wouldn’t mind a direct government bailout at the individual or household level if it was applied to everyone equally. For example, the government could grant every voting citizen a $25,000 credit. The total tab would be about $5 trillion funded by treasury securities bought by the Fed (sound familiar). But, who cares how big it is. Remember, it’s just debt transfer not creation. Any individual with debt would have to use their credit to pay down their debt first, whether it be a mortgage, credit card, student loan, or some other approved liability. Any individual without debt, or less than $25k debt, could use the remainder of their credit to offset future income tax liabilities. A program like this could be implemented and administered as easily as cash for clunkers. Imperfect as it might be, it would boost our real economy much more and much faster than routing all the funds through a bunch of selfish, scamming, pirating, short sighted, lawsuit loving, bumbling TBTF banks, which is effectively what the Fed is doing now.

Sun, 10/31/2010 - 15:30 | Link to Comment unununium
unununium's picture

I for one wouldn’t mind a direct government bailout at the individual or household level if it was applied to everyone equally.

But of course.  This is what should have been done from day 1 of the "crisis".

Banks knew it would take 2 years for the masses to catch on.  Everything is going according to plan.

 

 

 

Sat, 10/30/2010 - 10:42 | Link to Comment martinmugar@mac.com
martinmugar@mac.com's picture

http://www.youtube.com/watch?v=ssl5yb7FewA

 

Pretty good explanantion of who pays in the end

Sat, 10/30/2010 - 11:16 | Link to Comment Fearless Rick
Fearless Rick's picture

I found this "Special Report" to be just more of what I term "journalism lite," which is just pulling together lots of quotes, charts and numbers and making up a story. The author is basically clueless, but it makes pretty good copy for the uninformed masses.

I read the whole report. Didn't learn a thing. MSM is basically just JUNK journalism, like CNBC claiming the other day that they've "been on top of this [foreclosure-gate] from the start and are presenting in-depth reporting all day."

About the only thing CNBC has been "on top of from the start" was the faux terrorist crap on Friday fed directly to them through government channels. That's all they know how to do, re-create government and corporate PR, a very poor example of what passes for journalism these days.

Sun, 10/31/2010 - 02:27 | Link to Comment Attitude_Check
Attitude_Check's picture

The Marshall Plan was AFTER the US and Allies COMPLETELY DEFEATED the German AXIS, and took over complete control.  So after the banks are put into receivership - then a Marshall Plan might be appropriate

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