Government Says No to Helping States and Main Street, While Continuing to Throw Trillions at the Giant BanksSubmitted by George Washington on 01/13/2011 17:19 -0400
How is the government STILL bailing out the giant banks? Let me count the ways ...
You might think the banks have all the leverage in the world, the big secret is it's actually the opposite. Who do you think has more leverage, those who make payment on 7 trillion in securitized mortgage debt, or those who collect the payments? Who do you think is more worried? You probably make your income from a wage, they make their income from an investment, you wouldn't believe how quickly investors can become insecure, that's why your servicer doesn't want you talking to them directly, their brokers, and make a handsome living at it. Our thinking is the guy who writes the check has the leverage. After all, if you owe the bank $100,000 dollars you've got a creditor, If you owe them 7,000,000,000,000.00 we're pretty sure you've got a partner. Stop making rental payments on the home your supposed to own, then just sit back and feel the love.
We have already seen Chinese ghost cities, rickety buildings, and a construction spree that makes our own unionized labor force seem positive antiquated. Time to add empty malls to the list. The latest confirmed sighting of Chanos' "treadmill to hell" China real estate bubble thesis comes from Bloomberg's Paul Allen who reports from Dongguan, China on the New South China Mall, which has remained mostly vacant since it opened in 2005. Allen tours the South China Mall, originally conceived as the world's largest mall, and finds retail space that has been largely vacant since 2005. Allen reports, "The reality at South China Mall is somewhat different: shuttered shops, unfinished, never occupied by a single tenant. The few retailers that are here have favorable leases, but little profit." Allen also states that despite obvious problems, the mall’s owners plan to expand to more than one million square meters of retail and residential space will be available.
What a Year It Was! If you followed my pieces in Zero Hedge during 2010 you made a fortune. Nailing it with every asset class allocation. Only one small hickey from a short yen position.
You gotta trust the WSJ, right?
The NIA, traditionally known for cutting to the chase and not really mincing its words today focuses on the latest trillion + dollar bubble: that of US higher education, which is getting increasingly more funded directly by the US Government. "The National Inflation Association believes that the United States has a college education bubble that is set to burst beginning in mid-2011. This bursting bubble will have effects that are even more far-reaching than the bursting of the Real Estate bubble in 2006. College education could possibly be the largest scam in U.S. history." And the kicker: unlike housing debt, college debt has that extra oomph to it that it typically is not discharged in bankruptcy: as such it is the ultimate subjugation mechanism. This one sure is set to get interesting...
Is The Criminal Case Against Goldman About To be Reopened, As Robert Khuzami's "Ethical" Reputation Lies In RuinsSubmitted by Tyler Durden on 01/11/2011 20:09 -0400
After a few days ago we described in detail the facts behind the ACA lawsuit against Goldman, we were left scratching our heads how it could be that the SEC could ever possibly scuttle this criminal case which was obviously a slam dunk through court, and which based on the disclosures presented by ACA, is a blatant violation case of 10(b)-5 securities fraud and underwriter representation. We asked: did the SEC hide a key piece of the case against Goldman to fast track a settlement process? We concluded that even the SEC's otherwise completely inexperienced legal team should have been able to get this case through the finished line without the need to settle. Two developments today may allow us to postpone the head scratching for at least a bit. According to the FT, the Senate permanent subcommittee on investigations is about to issue a report which "will press the SEC to reopen its investigation into the bank." And in a completely separate report, we learn from Bloomberg that the SEC's top enforcement official, Robert Khuzami, who settled the SEC case with Goldman, is now being probed for his role in Citi's abrupt settlement over the summer. According to Bloomberg disclosures in a letter that served to open the probe "Khuzami ordered his
staff to drop the claims after holding a “secret conversation,
without telling the staff, with a prominent defense lawyer who
is a good friend” of his and “who was counsel for the company,
not the individuals affected.” We hope readers are able to put two and two together, and ask: just why is Robert Khuzami, former General Counsel for Deutsche Bank, still pretending to represent investor interests, when he obviously has far more powerful (and rich) interests to answer to?
Zero Hedge is happy to announce a new collaboration with the precious metals experts at Gold Core. We look forward to posting periodic industry updates, notes, analysis and commentary in conjunction with GC on all matters of topical significance in the PM space. As an introduction, we would like to present GoldCore's review of 2010 and Outlook for 2011. A sample from the analysis: "Should the dollar and other debt laden currencies and government bonds fall sharply in value due to a panic and wholesale liquidation we could experience hyperinflation. In this scenario paper assets will be shunned and people will protect themselves by buying hard assets such as real estate, commodities and gold and silver bullion. In such a scenario, gold and silver surge would quickly reach their inflation adjusted 1980 high of $2,300/oz and $130/oz before overshooting to much higher levels as was seen in Weimar Germany and more recently in Zimbabwe."
For nearly two years Zero Hedge (and others) have badgered Goldman Sachs for being purposefully opaque in its reporting structure to not allow any transparency in the split between flow and prop trading revenues, instead lumping everything into the ubiquitous "Trading and Principal Investments" segment of which FICC (fixed income, currency, commodity) has always been the dominant vertical for the taxpayer sponsored hedge fund. This is about to change. In a just released 67 page report titled Report of the Business Standards Committee, Goldman announces that going forward this key trading group will now be split into two separate segments: "Institutional Client Services" and "Investing & Lending" which will provide much more detail on how the firm determines its trading revenue, and will allow objective, third party analysts to determine just how much risk the firm takes on from both a principal (taxpayer funded) and agent (dumb mutual fund money) capacity, something which should have been the case long ago, and which we railed about for two years now. We are happy that our railing on this most important topic has been met with success.
No Federal Preemption by a Trustee of a Mortgage Backed Security Trust from Senior Counsel of the Office of the Comptroller of the CurrencySubmitted by 4closureFraud on 01/10/2011 16:25 -0400
In short, the Banks’ authority to act as trustees under federal law does not insulate the assets the Banks hold in trust for the benefit of investors from state law requirements otherwise applicable to those assets.
In Shocking New Taxpayer Funded Study, San Fran Fed Finds That Easy Credit Leads To Increase In Household BorrowingSubmitted by Tyler Durden on 01/10/2011 16:05 -0400
Those oberstabsfeldwebels of the unobvious from the San Fran Fed are back at it, issuing another blisteringly original, taxpayer funded, masterpiece which finds that "in the years leading up to the financial crisis of 2008–2009, a combination of factors including low interest rates, lax lending standards, the proliferation of exotic mortgage products, and the growth of a global market for securitized loans promoted increased household borrowing." In other words, easy credit led to an increase in household leverage... How truly unbelievable. But hark, it continues: "Homebuyers with access to easy credit helped bid up U.S. house prices to unprecedented levels relative to rents and disposable income...U.S. household leverage, as measured by the ratio of debt to disposable income, reached an all-time high of 130% in 2007." You don't say- the Fed's easy credit legacy led to the biggest credit bubble in history? Wow, and it was Alan Greenspan saying just a few days ago that the Fed had nothing to do with the credit bubble... But wait, there's more: " Going forward, households may keep trying to reduce excessive debt loads by increasing their saving." In other words, broke Americans who have no access to credit, will be forced to save. Thank god for such insightful, uber-brains as Reuven Glick and Kevin J. Lansing who were able write such a brilliant research paper, with such profoundly powerful conclusions.
Less Than 24 Hours After My Warning Of Extensive Legal Risk In The Banking Industry, The Massachusetts Supreme Court Drops THE BOMB!Submitted by Reggie Middleton on 01/10/2011 14:01 -0400
Those who think this will not, better yet... has not metastasized into a very significant problem has overdosed on the Sell Side Kool Aid once too often. The banking industry is soon to be the new tobacco industry.
- ECB buying every sovereign bond it can find. Seriously
- Obama Eyeing Internet ID for Americans (CBS)
- US Banks Face Fresh Stress Tests (FT)
- SNB Clarifies Stance On Portuguese Bonds (WSJ)
- Demanding the Mark Back: Opposition to the Euro Grows in Germany (Spiegel, h/t Mark Mansfield)
- Evans-Pritchard: Deepening crisis traps America's have-nots (Telegraph)
- Trade War Looming, Warns Brazil (FT)
- Yellen Speech May Offer `Proxy' for Planned Unwinding of Fed QE (Bloomberg)
- Paul Krugman Channels Jimmy Carter, and The Club of Rome (Forbes)
- Portugal under pressure to seek EU/IMF aid (Reuters)
- China City Set to Tax Residential Real Estate (WSJ)
- "Illusory Prosperity" - Ludwig von Mises on Monetary Policy (Hussman)
- Queensland Floods Within Insurers' Capacity Deluge Worsens (Bloomberg)
Morgan Stanley's real estate division hits yet another home run in (in fees) as investment clients get (literally) taken to the bank.
When it comes to providing analytical perspectives and empirical insights into the realm of sovereign deterioration, few come close to the work of Reinhart and Rogoff. Citi’s Willem Buiter is one such man. In his latest summary piece describing in excruciating detail just how bad things are at the sovereign level (and judging by tonight's opening print in the EURUSD more are starting to realize this), Buiter provides a terrific country by country guide of what is now an insolvent world, starting with the merely extremely risky, going through the backstop-baiters, and finishing with the time bombs that have already gone off and everybody pretends not to care. For those who do care, this is a definitive guide to what each individual European (and not only) country can look forward to in an age of global moral hazard. The only open question: with China's interest now to preserve the Euro's viability, how will Beijing act in the next few months as the eurozone finally starts unraveling.