Michael Burry Demolishes The Fed's Self-Perceived Infalliblity, Discusses The Cost Of "Extend And Pretend"Submitted by Tyler Durden on 04/04/2010 11:56 -0500
The recently (in)famous Michael Burry, writes a blistering op-ed for the NYT, in which he implicitly asks one simple question: just how dumb are Alan Greenspan and Ben Bernanke? The man who foresaw it all, subprime crisis, banking system collapse, counterparty risk, CDS scapegoating and emerged from the second coming of Great Depression 2.0 a much wealthier man, has so far had exactly zero invitations to share his insight with Washington's Wall Street proxy legislators, and, in addition, has had his forecasting skills called a "statistical illusion" by the very same Greenspan who took the economy to the brink, and whose successor is now doing just that in the second doomed great reflation experiment. At this point one has to be an immaculate idiot (read Chairman of the Fed) not to see, that what the Fed is doing with the pursuit of the same catastrophic monetary policy which failed the first time around, and will fail now, is pushing us straight into the abyss, from where America just barely managed to crawl out in 2009 via $3 trillion in additional public debt issuance to date (a number which will likely hit $10 trillion within the next 5 years, to result in a debt-GDP ratio of approximately 200% when including the GSEs). It has gotten so bad that even Fed governors are begging Bernanke to stop the madness before it is too late: a first sign of internal mutiny. Alas, just like when everyone ignored Michael Burry, who laughed into the face of conventional groupthink in the mid-2000's (which by definition is always wrong, and will be this time around as well), so will Wall Street and its proxy, Washington D.C., ignore that which is all too obvious until it is once again too late. Hopefully by then intelligent and very rich life on Mars will be discovered, cause there will be no one left to bail out not just the US, but the world.
This might mean something. I think so.
Breaking from Diana Olick: Bank of America will start offering principal forgiveness programs for most at risk mortgages. The bank will target subprime, pay option, and prime 2 year ARMs, no 30 year loans. Loans must have principal balance at least 120% of the value of the home. As the bank has over 1 million delinquent loans. The hit to BofA's balance sheet will be over $3 billion as the firm will need to write down its existing mortgage book (probably still at 99%) to fair value. Surely this is dictated by the government's desire to add some investor-funded oomph to its taxpayer-funded HAMP disaster. And with that, debt forgiveness for all begins! Max out all your credit cards now because the bank, per Barney Frank, will forgive it all. Oh wait, you already have... Carry on then.
He said nothing, but a lot was said. My thoughts.
Gasparino breaks news that David Einhorn will be brought in as a witness in the upcoming Congressional hearing on the Lehman's fraudulent disclosure as reported by the much discussed Anton Valukas report. According to the Fox Business senior correspondent: "Einhorn through a spokesman declined to comment, but a person close to Einhorn said “it wouldn’t be a surprise” if he was called in some way given his role in exposing Lehman’s problems. A spokesman for US Rep. Barney Frank, the chair of the committee, didn’t return a telephone call for comment." With Tim Geithner most likely present at the hearing, this will be quite a memorable spectacle, which will certainly result in absolutely nothing as usual.
At 10:00 AM Tim Geithner will take the podium to pretend he has some clue of how to reform the GSEs (which is funny, because he doesn't). Those who want to watch Geithner live and commercial free can do so here. As we posted yesterday, here is a copy of Tim Geithner's prepared remarks.
Summarizing Today's Fed Chairman Q&A: Prepare To Vastly Exceed Your Recommended Daily Allowance Of Bernanke's PrevaricationsSubmitted by Tyler Durden on 03/17/2010 22:47 -0500
We comb through today's key Q&A by Ron Paul, Brad Sherman, Spencer Bacchus and Scott Garrett to find all the relevant instances in which Ben Bernanke either a) pleads the fifth, b) provides reasons to doubt his sanity, c) confuses what monetary policy is all about (not to mention cause and effect), d) forces Zero Hedge to send an Econ 101 textbook to the Marriner Eccles building c/o Ben Shalom Bernanke, or, e) lies outright.
One of the more vocal economic skeptics (as pertains to the developed world at least, China not so much), CLSA's Chris Wood, chimes in with his latest weekly observations on the economy, which are not for the faint of heart, in the latest edition of GREED and fear. Digging in.
It's dump on Barney day. He deserves it.
FRANK:ASKS 4 TOP BNKS TO WRITE DOWN 2ND LIEN MORTAGES
FRANK SENT LETTER TO BK OF AMERICA,JP MORGAN,WELLS FARGO, CITI
FRANK:ASKS TO ALLOW PRIN REDUCTN MODIFNS OF UNDRLYNG 1ST LIENS
FRANK:LARGE NUMBER OF 2ND LIENS HAVE NO ECON VALUE
FRANK:2ND LIEN MORTGES NOW MAIN OBSTACLE TO LOAN MANY MOFIS
FRANK:MUST FOCUS ON PERMANENT MTG LOAN PRINCIPL REDUCTION
FRANK ASKS 4 TOP BKS MORE ACCURATE ACCNTG OF 2ND LIEN MTGS
Of course, the impact on Tier 1 capital will be felt (and if the market was efficient, priced in) immediately. One wonders after Second Liens, what next? Holdings of CRE, CMBS? Cross equity holdings? All other mark to myth "assets"?
Our pal Barney Frank puts his foot in his mouth, again.
“To reiterate, I continue to think that it would be a mistake for Congress to take action that formally conferred on Fannie and Freddie debt the legal status of debt issued by the Treasury. But nothing in that position prevents Treasury from acting as it thinks best with regard to its obligation to provide stability to the housing market and the financial system.” - Barney Frank, Post Appendage In Mouth
The latest update in the ongoing GSE drama comes from Barney Frank who during a conference of black, Hispanic and Asian Realtors
in Washington said the following: “Please don’t think this is federally guaranteed, I don’t
think it is, I don’t think it should be, I don’t feel any
obligation to bail you out.” Well, that comes almost two year two late after the government already made all GSE lenders whole. Barner's posturing is merely in response to Republican efforts to account properly for GSE liabilities which, courtesy of their conservatorship status, are explicitly backed by the government. Of course, should the GSEs be put on the budget, the US debt/GDP, as pointed out previously on Zero Hedge, would surge by nearly 50%, from 90% to 140%. But Barney Frank, just like Peter Orzsag, is all about semantics.
Barney Frank Demands Bernanke Probe Fed Involvement In Watergate Scandal And Iraq Arms Sales Following Ron Paul QuestioningSubmitted by Tyler Durden on 03/03/2010 19:03 -0500
A week ago Ron Paul asked Ben Bernanke a series of questions, which the Chairman and pundits immediately dismissed as "bizarre" and an indication that the potential presidential candidate has finally lost it (among these was a very nuanced question whether or not the Fed is buying sovereign debt, something which Bernanke disclosed in 2002 is a distinct possibility and an action the Fed is permitted to do). Chief among these were queries arising from the work of U of T professor Robert Auerbach, and specifically his book "Deception and Abuse at the
Fed", which seek information on whether the Fed was involved in the Watergate scandal and, subsequently, in Iraqi weapons purchases. Well, Paul may not be as kooky as people are trying to make him out to be. None other than "consumer protection advocate" Barney Frank has demanded that Bernanke do a full probe based on these allegations.
Pulling Volcker out of the closet following the Massachusetts debacle was a useful diversion: the whole prop trading ban seemed almost credible. And now that there are no immediate public votes in the future, it is safe to put Volcker back where he belongs, but quietly, lest the morts and general peasantry think that Obama is all bluster and no actions. Alas, if the latest development in the ongoing Wall Street "regulatory" saga, as reported by the FT is any indication, the prop trading plan, as proposed by Volcker, is now dead. This time, the last chance to put the financial system on some stable footing comes courtesy of Dick Shelby, Chris Dodd and Paul Kanjorski.