Countrywide

There is a lot of talk about IG9 these days.  We think the JPMorgan 'Iksil' story has a lot more to do with tranches than with outright selling of the index. Noone knows what exactly is going on, but we think selling tranches without delta explains far more than just selling the index, given the size and leverage. Critically, in the end it is all speculation as what (if any) trade they have on but if our belief on this being a tranche exposure (for the thesis reasons we explain) then the explanation is far less scary.

A month ago, after causing a spike in cotton prices following the imposition of an export ban, India promptly overturned said surprising move following a surge in protest from not only various trade local groups, but more importantly China, whose already razor thin margins would become negative if input costs soared even further. The whole process lasted about 72 hours from beginning to end. Days after, desperate to fund ongoing budget shortfalls, the government shifted its attention to price controls in a market it knew China would absolutely not mind to having the price kept artificially low - gold. What happened then was an announcement by the government to impose to levy an excise duty on unbranded jewelry. The response was swift - a countrywide strike among India's jewellers who all went dark, crippling demand from one of the traditionally strongest gold markets in the world. And all this happening at a time when the wedding season is at its peak, with Akshaya Tritiya, one of the biggest gold buying festivals later in the month, making the period crucial for jewellers. As of hours ago, the Indian finance ministry has caved, and while it took three days to end the cotton export ban, it took three weeks to end the excise duty proposal, India's Finance Minister Pranab Mukherjee said that the government would consider scrapping a budget proposal to levy an excise duty on unbranded jewellery. The result will be three weeks of pent up demand for precious metals being unleashed suddenly, likely pushing spot gold far higher, to where it would be had this latest artificial price control never been established.

5 days ago saw the 150th year anniversary of an event so historic that a very select few even noticed: the birth of US fiat. Bloomberg was one of the few who commemorated the birth of modern US currency: "On April 2, 1862, the first greenback left the U.S. Treasury, marking the start of a new era in the American monetary system.... The greenbacks were originally intended to be a temporary emergency-financing measure. Almost bankrupt, the Treasury needed money to pay suppliers and troops. The plan was to print a limited supply of United States notes to meet the crisis and then have people convert the currency into Treasury bonds. But United States notes grew in popularity and continued to circulate." The rest, as they say is history. In the intervening 150 years, the greenback saw major transformations: from being issued by the Treasury and backed by gold, it is now printed, mostly in electronic form, by an entity that in its own words, is "set up similarly to private corporations, but operated in the public interest." Of course, when said public interest is not the primary driver of operation, the entity, also known as the Federal Reserve is accountable to precisely nobody. Oh, and the fiat money, which is now just a balance sheet liability of a private corporation, and thus just a plug to the Fed's deficit monetization efforts, is no longer backed by anything besides the "full faith and credit" of a country that is forced to fund more than half of its spending through debt issuance than tax revenues.

Mortgage bondholders are threatening legal action over the $25 billion national mortgage settlement, which will give the five largest servicers credits for principal writedowns that the bondholders may be forced to take. As American Banker notes, the investors in those trusts were not a party to the settlement agreement, and now they are objecting to being forced into taking losses - to the banks' benefit - as a result of it. The government is forcing investors to take losses even though they were not responsible for the foreclosure process abuses that led to the banks' settlement with state and federal officials. "The banks are trying to pay these fines with our money," says Vincent Fiorillo (of DoubleLine). Chris Katopis, the executive director of the bondholder trade group, says it is considering its legal options, including filing a friend of the court amicus brief or suing servicers individually..."Banks are shifting their liability to first-lien investors that were innocent of robo-signing,". Bondholders are especially concerned about writedowns from Bank of America, which has privately securitized more than $285 billion worth of mortgages originated by Countrywide Financial Corp.

All you need to read.

Minutes ago on CNBC, Jim Cramer announced that Greg Smith will never get a job on Wall Street again as "one never goes to the press. Ever." Naturally, the assumption is that the secrets of Wall Street's dirty clothing are supposed to stay inside the family, or else one may wake up with a horsehead in their bed. There is one small problem with that. Now that compensations on Wall Street have plunged, and terminations are set for the biggest spike since the Lehman collapse, the opportunity cost to defect from the club has also collapsed. And if anything, Greg Smith's NYT OpEd has shown that it is not only ok to go to the press, but is in fact cool. So what happens next? Well, as the following Reuters article reports, 'whistleblowing' over corrupt and criminal practices on Wall Street is suddenly becoming the next growth industry. Yes - people may get 'priced out' of the industry, but since the industry will likely fire you regardless in the "New Normal" where fundamentals don't matter, and where the only thing that does matter is the H.4.1 statement (as Zero Hedge incidentally pointed out back in early 2010), why not expose some of the dirt that has been shovelled deep under the coach, and get paid some serious cash while doing it?

• Obama, Cameron discussed tapping oil reserves (Reuters)
• Greek Bonds Signal $2.6 Billion Payout on Credit-Default Swaps (Bloomberg)
• China leader's ouster roils succession plans (Reuters)
• China’s Foreign Direct Investment Falls for Fourth Month (Bloomberg)
• Greek Restructuring Delay Helps Banks as Risks Shift (Bloomberg)
• Concerns Rise Over Eurozone Fiscal Treaty (FT)
• Home default notices rise in February: RealtyTrac (Reuters)
• China PBOC Drains Net CNY57 Bln (WSJ)

And I thought securitization ment they where going to keep the loan docs in a safe place in some bank vault some where...

This is just a small example of what we are uncovering. If we learned anything from the robosigning scandal, if there are more than two “irregularities,” there are thousands.

Now everybody's bank bashing, of course the reason to bash the banks is 4 years old, despite Bove-like analysis to the contrary. I will discuss this on CNBC for a FULL HOUR tomorrow from 12 pm to 1pm.

Hubris is at the heart of this. Everyone says this cannot happen – we won’t allow it. Says who? The EU says: if it is written in an agreement, it must be totally correct, unchangeable, and followed at all costs. New realities can’t intervene and no slippage is allowed. Why the Germans are so sure that they know the future is beyond me. They are fallible too, but they won’t admit it, and the Greeks can’t make them budge. Haven’t they looked around? Santorini has a different economic and social cost structure than Wiesbaden. Humanity (and common sense) seems totally lacking in the negotiations with the Greeks and a violent backlash would be totally understandable. Why the countries that have been fattening up their current account surpluses selling products to Greeks, whom they should have known were basically broke – just as they always have been – should be paid 100% on the euro is beyond me. Major losses should apply not only to sovereign borrowings but also to accounts receivable for cars, electronics, and other consumer goods. The market has not opened its eyes to the impact this Greek unraveling will have. The Eurozone will be mortally wounded and the world will suffer a significant recession – maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the banks’ bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books.

Isn’t it meaningless to look at the inverse floaters in isolation? To assess risk, shouldn’t we look at the entire portfolio held by Freddie Mac?

Call Your State Attorney General and "Just Say No"

And then there were four.

• RICK PERRY MAY DROP OUT OF PRESIDENTIAL RACE TODAY, CNN SAYS

It appears even Bank of America (which had a hilarious and brilliant $600 million Goodwill impairment today - on what? The fantastically prfoitable Countrywide acquisition) could not "help him out."

Of course, everyone is now expecting tonight's impromptu ABC "Career ending" interview with Mrs. ex-Gingrich, which may make it a trio. That may happen even despite Perry's imminent enrosement.

• Here we go again: IMF Said to Seek $1 Trillion Resource-Boost Amid Euro Crisis (Bloomberg)
• China said to Tell banks to Restrict Lending as Local Officials Seek Funds (Bloomberg)
• EU to Take Legal Action Against Hungary (FT)
• Portugal Yields Fall in Auction of Short-Term Debt (Reuters)
• US Natural Gas Prices at 10-Year Low as Warm Weather Weakens Demand (Reuters)
• German Yield Falls in Auction of 2-Year Bonds (Reuters)
• World Bank Slashes Global GDP Forecasts, Outlook Grim (Reuters)
• Why the Super-Marios Need Help (Martin Wolf) (FT)
• Chinese Vice Premier Stresses Government Role in Improving People's Livelihoods (Xinhua)