On March 16, 2009, the Financial Accounting Standards Board (FASB), a private-sector organization that establishes financial accounting and reporting standards in the US, turned the stock market around and at the same time motivated banks to become the worst slumlords and neighbors imaginable.
Most people believe accounting is conservative, the rules cut and dried. Accountants make economists look frivolous. But accountants are people too, and FASB succumbed to pressure from Capitol Hill in the wake of the 2008 financial crash.
How It All Started
The S&P 500 hit a devilish low of 666 on March 6, 2009. More major bank failures seemed a certainty. Somebody had to do something—and in stepped the accounting board prodded by the House Committee on Financial Services.
The board changed financial accounting standards 157, 124, and 115, allowing banks more discretion in reporting the value of mortgage-backed securities (MBS) held in their portfolios and losses on those securities. Floyd Norris reported at the time for the New York Times,
The change seems likely to allow banks to report higher profits by assuming that the securities are worth more than anyone is now willing to pay for them. But critics objected that the change could further damage the credibility of financial institutions by enabling them to avoid recognizing losses from bad loans they have made.
"With that discretion," fund manager John Hussman writes, "banks could use cash-flow models ("mark-to-model") or other methods ("mark-to-unicorn")."
And author James Kwak wrote on his blog "The Baseline Scenario" just after FASB amended their rules: "The new rules were sought by the American Bankers Association, and not surprisingly will allow banks to increase their reported profits and strengthen their balance sheets by allowing them to increase the reported values of their toxic assets."
Banks were loaded with securities containing subprime home loans. When borrowers stopped paying en masse, the value of these securities plunged. Until the change in March 2009, these losses had to be recognized. With financial institutions leveraged at upwards of 30-1 at the time, the sinking valuations made much of the industry insolvent… until March 16, 2009. Since then the S&P has nearly tripled.
Bad-Neighbor Banks
Nobody has more friends on Capitol Hill than bankers, who are not wild about free-market capitalism when it works against them.
"Bankers bitterly complained that the current market prices were the result of distressed sales and that they should be allowed to ignore those prices and value the securities instead at their value in a normal market," Norris wrote for the New York Times on April 2, 2009.
The change in the rules first of all allowed banks to remain in business. Second, with banks having wide discretion in valuing mortgage-backed securities, they had little incentive to care for the collateral of the loans contained in those MBSs. It may even be in a bank's best interest to leave houses in what the Sun Sentinel newspaper called "legal limbo."
Last year the Florida paper devoted a three-part series to "Bad-Neighbor Banks." When homeowners walk away, one would think it would be in the banks' best interests to gain legal possession as soon as possible and either sell as is, or repair and sell quickly.
Apparently that's not the case. All across Florida, banks "have halted foreclosure proceedings because the remaining equity in the properties is deemed inadequate to cover the banks' costs to reclaim title and maintain, refurbish and sell them," Megan O'Matz and John Maines wrote for the Sun Sentinel.
When pressed about weed- and rodent-infested abandoned properties, banks often pointed the finger at mortgage servicers. South Florida attorney Ben Solomon, who represents condos and community associations in foreclosure cases, stated, "We see bank delays every day. They really continually have been getting worse. More and more time is going by."
As banks sit on assets indefinitely without having to recognize a loss, homes get lost in vast bank bureaucracies. When the banks finally figure out what they have, "lenders also have been walking away from foreclosure actions involving homes with low market values, after their cool-headed calculation that the homes cannot resell for enough to offset the costs of foreclosing, repairing, maintaining and marketing them," O'Matz and Maines wrote.
Now banks have rebuilt their balance sheets and are able to withstand losses from bad property loans. Enough banks are walking away from properties that the Treasury Department issued "guidance" in 2011, advising to do so cautiously.
Banks that do foreclose with tenants living in a property are notorious for not maintaining their newly acquired properties. "Some banks are failing to follow local and state housing codes, leaving tenants to live in squalor—without even a number to call in the most dire situations," writes Aarti Shahani for NPR.
I'm not sure why anyone would expect banks to be good property managers. "Banks don't want to take your home and own it," Paul Leonard, senior vice president of the Housing Policy Council, told NPR. "They're stuck with plumbing and electrical maintenance that is well beyond their mission. They have to hire a property manager to take care of the property."
Global banking behemoth Deutsche Bank foreclosed on 2,000 houses in the Los Angeles area between 2007 and 2011. The big bank was such a bad landlord, the city filed suit and the bank recently settled the case by paying $10 million—which the bank didn't even have to pay itself. According to Deutsche Bank officials, "The settlement will be paid by the servicers responsible for the Los Angeles properties at issue and by the securitization trusts that hold the properties."
If banks, not to mention Fannie Mae, Freddie Mac, and FHA, had been allowed to fail, the housing market would have cleared and stories like these would be a thing of the past. However, one intervention begets another, and the market is held stagnate.
Auctions: Bids Coming Up Short
While there are housing booms popping up in various cities, Bloomberg just reported a failed auction by the US Department of Housing and Urban Development (HUD).
After successfully selling 50,000 non-performing, single-family FHA-insured loans since 2010, HUD deemed the bids for $450 million too low to accept at their October 30 sale.
(As an interesting aside, the FHA was a product of Roosevelt's administration during the Great Depression and hasn't required the help of taxpayers until this September when the agency asked for a $1.7 billion bailout to keep operating… a piece of news that got drowned out by the looming government shutdown, the slowly developing Obamacare train wreck, and the Breaking Bad series finale.)
HUD has another $5 billion auction scheduled and is currently qualifying bidders. The auctions run through the website DebtX, which has compiled a Bid-Ask Index to compare recent years' buyers' bid performance versus seller expectations. For the last three years, bids have come up short of sellers' ask prices. The index prior to the failed auction was -5.7%.
Meanwhile, the banking industry purrs right along earning a record $42.2 billion in the second quarter.
The Banks Are the Only Ones Profiting
For the banks, this was the 16th consecutive quarter of year-over-year increases. A primary driver of the record earnings is less money being socked away in loan-loss reserves. Banks put away the lowest loss provision since the third quarter of 2006. The banking industry's coverage ratio of reserves to noncurrent loans is still only 62.3%, far below what was once the standard of greater than 100%.
Remember when President Obama and the Treasury Department claimed the bank bailouts were generating a profit? Special Inspector General Christy Romero overseeing TARP said, "It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost)."
Fannie Mae and Freddie Mac have turned things around and are generating huge profits, you say?
Not so fast.
According to bank analyst Chris Whalen, "If we were to implement the guidance from FHFA today, it is pretty clear that the profits of the GSEs [government-sponsored enterprises] would have been largely offset by the allocations needed to replenish the reserves." GSE profits would disappear, and $10 to $20 billion would need to be added to reserves.
"Not only does FNM [Fannie Mae] seem to be unprofitable under the new FHFA guidance, but payments made to Treasury might need to be reversed," writes Whalen.
A zombie government armed with accounting tricks has bailed out a zombie banking industry using even more financial phoniness. A few numbers pushed here and there, and the industry is earning record profits. But out in the real world where people live and work, things aren't so rosy. Zombies make negligent landlords and dangerous neighbors.
Read more from Doug French, former president of the Ludwig von Mises Institute, in the Casey Daily Dispatch—different writers, different topics, different investment sectors each day of the week. Get it free of charge in your inbox, Monday through Friday—click here.


Foist?
One mistake in the article: the FHA was a product of the Hoover Administration, not FDR
That was the day the music died, we went from mark to market, to a mark to model economy. Anyone could model their own economy, a bank, a hedge fund, a broker, and their was no standard as their was with a mark to mkt. We went from having all street smarts and court smarts and book smarts, to having none or one of the afore mentioned. A game where you are out front all the time and leaving most others in your dust or wake, all but the one that is, the one who is street smart, and court smart, and yes folks, triple book smart. Good luck out there, you're gonna need it precisely from past days like this one.
Can anyone say Enron. What was once taboo is now business as usual.
I have one other quibble. The banks are not "earning" profits. They are "making" profits.
they are all zombies, the banks, the gubbermint, the people...
People yes. The banks and government are fabulously rich. Zombies are not rich.
Wha? Banks that should be dead, and yet wander the landscape feeding off the living? Sounds like fucking zombies to me, I don't care how rich they are.
Gives me the itch to play "Left for Dead 2" and pretend the Zombies are CONgress critters, FED officials, the branches of .gov, and Lloyd and Jamie.
Try www.jimmysavilemurders.com for NSA/Windows. Okay not much to shoot, but the bad guys are all illuminati.
It's all fun and games until someone gets their face chewed off...
Every major debt collapse in modern (developed nation) history has been dealt with by effectively packing, stacking and racking the debt. This one is no different.
I'm tired of waiting for the market to correct. It never will. Even after the physical properties have been consumed by mold, termites and vandalism, the debt will live on. And on. And on. Sucking away future PRODUCTIVE lending opportunities. But really, who gives a crap about that. The elites saved themselves in 2008-2009. That's all that matters. We should all thank them for allowing us little people to exist, even if it's only as their debt slaves. After all, without them, we would all be dead.
Without them they would be dead, and some of us would be okay, to start another day, another way, but hey who didn't already think of that.
Four causes http://www.youtube.com/watch?v=IPNyU0a2ko8
Is that rotting flesh USDA-approved?
"A zombie government armed with accounting tricks has bailed out a zombie banking industry using even more financial phoniness." That only works because the vast majority of "We the People" have become Zombie Sheeple. Zombie Sheeple make negligent citizens and dangerously ineffective limits on the abuse of power by their Zombie Government and Zombie Banks. We are trapped in vicious spirals due to the triumph of organized crime being able to reinvest the profit from fraud in more fraud, primarily through the funding of the political processes, which spread out through all aspects of every social institution controlled by its sources of funding.
That did NOT start at any particular time in the past, such as in 2009, in response to the financial crises in 2008. The systems of legalized lies, backed by legalized violence, i.e., Zombie Banks dancing with Zombie Governments, allowed to stamp over them by the Zombie Sheeple, goes back as far as one one to looks, in the form of lies, backed by violence, made possible as soon as there were systems of symbolic understanding, which could be changed by coercion.
FOR SURE, "Zombies Make Dangerous Neighbors!" However, the deeper source of that Zombification is the way that backing up lies with violence can enable those lies to become socially dominant, despite the fact that those lies are false. THAT is why we have a fundamentally fraudulent financial accounting system, which is a state religion, built on faith-based "money," where that faith only exists because of the history of force. Zombies were man-made, rather than naturally existed, by processes which deliberately reduced the ability of people to be functionally intelligent. The driving mechanism behind the Zombification was the ability to backed up frauds with force, which ran away to become legalized lies, backed by legalized violence, in the form of Zombie Governments enabling Zombie Banks to lord over the Zombie Sheeple.
However, given that, it still is extremely difficult for people to break out of that vicious spiral, by no longer believing in the biggest bullies' bullshit social stories, since those stories have been developed through the history of warfare, and triumphant financial frauds, for thousands of years, to create a Zombie Planet! The "accounting tricks" include not only driving social polarization, but also driving the destruction of the natural world, since everything is being controlled by triumphant runaway systems of those accounting tricks, based upon force backed frauds.
More radical truth to perhaps overcome those frauds, and their resulting Zombication of the population, and its political processes, would require an accounting system which was consistent with the general understanding of energy systems, and the laws of thermodynamics and information theory. However, the core of that would require understanding how and why the government operates as organized crime, controlled by the best organized gang of criminals, the biggest gangsters, the banksters. At present, way too few of the Zombie Sheeple are able and willing to go through enough of the process to become more competent citizens. Instead, overall, it still looks like the Zombies are generally becoming more brain dead and stupider, rather than returning to be able to be more functionally intelligent. In that context, one has to hope for some series of political miracles, in order to hold on to some irrational hope that there is not necessarily going to be a Zombie Apocalypse.
Fuck you and your pimping zombie sheeple psychobabble. Jerking off in what ever redoubt you're in must be grand; you and your hand. My guess is you have no exterior presence. I've noticed that whatever the topic is you riff. You go on and on, and, say nothing worthwhile. Pure autoerotic bullshit.
I guess you've never been stoned.
Well, yofish, since you make nothing but ad hominem attacks, I will respond with a little personal anecdote about "jerking off." A few decades ago, when I was student at university, I got enrolled as being a donor in an artificial insemination program for a few years, during which time I donated 252 times, at $50 dollars per time, fathering approximately a couple dozen children. Also, I channeled most of the money I made from those sperm donations through a political party that I was then a registered agent of, thereby becoming able to gain political contribution tax credits from that money, as well as still being able to spend it later in the ways that I wanted to. After I moved away, out into the countryside, it was no longer convenient to continue being a donor. However, in fact I did engage in professional masturbation for a few years, and managed at the same time to turn that into a registered political activity. (I found it an interesting coincidence that the Canadian government later ordered two royal commissions of inquiry into the funding of politics and reproductive technologies. As far as I know, I was the only person who explicitly connected those two things in the real world during the time that the events were transpiring that motivated the government to commission those inquiries.)
In general more radical truth does have very little influence upon the real world, which is almost totally dominated by established systems of legalized lies, backed by legalized violence. However, it would be an exaggeration that more radical truth has zero influence, or no exterior influence.
Of course, I believe it is important to try to better understand how and why we DID end up with zombie banks & governments! Furthermore, IF we survive through the coming Zombie Apocalypse, THEN more radical truth will probably become more important.
Here are a few classic observations for you, yofish, since again, and again, I have wondered about these quotes:
Durkheimian Deviants:
http://www.emile-durkheim.com/
You know, a kind that may benefit society in the long run, although, at the time, society may not appreciate them.
Or, as in the pattern recognized in
The Structure of Scientific Revolutions
by Thomas Kuhn
http://www.des.emory.edu/mfp/Kuhn.html
We may be pushing towards the cusp of a paradigm shift in science ...
Or to paraphrase both Gandhi:
http://thinkexist.com/quotation/first_they_ignore_you-then_they_laugh_at_you-then/214891.html
"First they ignore you, then they laugh at you, then they fight you, then you win." *
* But, they may assassinate you, like marijuana martyrs, while you were working to "win."
and Schopenhauer:
http://thinkexist.com/quotation/every_truth_passes_through_three_stages_before_it/159319.html
"Every truth passes through three stages before it is recognized: In the first it is ridiculed, in the second it is opposed, in the third it is regarded as self-evident." *
* However, some individuals who propose the valid paradigm shift may have their careers destroyed before their ideas were recognized as being valid ...
The first stage blends into the second.
Being ignored blends into ridiculed / laughed at.
Those ideas only become seriously considered
when they are enough to start being attacked.
If human civilizations ever become sustainable, then the basic concepts of human ecology, and human evolution, must become commonplace. However, that is totally NOT the case currently.
Very few people who promote paradigm shifts were lucky enough to live through all 3 stages. Most of them were destroyed during the first 2.
Every single day, yofish, from 1984, up until today, my ideas and work on the Canadian Political Contribution Tax Credit has been proving over and over again that the extablished political systems are based on arrogantly dishonest governments using their power to threaten everyone, so that almost everyone continues to act like political idiots, as the contents of the following link proves to be the case:
http://www.marijuanaparty.ca/article.php3?id_article=215
As quotes in this video summarized it:
http://www.youtube.com/watch?v=00iY4cpEQDY#t=38
Michael Hudson:
Oligarchy will never cancel the debt we owe
"Every time history repeats itself, the price goes up."
" ... The oligarchy is running things ... They would rather annul the right to live of the bottom 90% than annul the money that is due to them. They would rather strip the planet, and shrink the population, and be paid, rather than give up their claims ... That's the political fight of the 21st Century."
I agree with that analysis, however, I perceive no good reasons to expect that the oligarchical fascist plutocracy shall not mass murder people, since the vast majority of the people ARE Zombie Sheeple, not merely superficially, but also much more deeply towards the real debt controls, and death controls. All problems became magnified trillions of times by science and technology, while human beings continued being extremely greedy and stupid, since the science and technology were used primarily to get better at backing up lies!
Given the ways that the ruling class depend on being able to be Dishonest, and Violent, so that the vast majority are kept Ignorant and Afraid, ARE the real systems, hence, I have no reasons to believe the "Zombification" will be stopped.
Gaza-style America cometh?
Detroit-style Gaza cometh ?
May Allah help them.
"what's the trouble, Jim?"
"run, Bill, it's a zombie bank. It won't stop til it's eaten all your money!!"
"Ahhhhhhggrrrgh!!"
S&P 666 is the true valuation today.
Zombie FED, .gov, and Wall Street want responsible working citizen flesh! Angh, angh, angh!
Load the shotguns boys and girls!
Fuck this zombie shit. Meme, zombie, moar all the combinations of the letters FTBS etc. and all the other stupid teenage code words and acronyms that gives everyone here an erection.
Get down on your knees and give thanks that you have not yet received what you so desperately want.
A pony?
Classic comeback...
@ Radical Marijuana
I feel ya bro!
BUT it's not ALL bad news; We still got the sun in the morning and the moon at night.
They can't take those away from us, right! Right?
Also Annies in Denver will sell recreational MaryJo legally from the 1st Jan 2014 bro. Full ounce to residents per day and a quart per day to out of townnies; chillout dude.
Third and not least weez still got music, good Christian folks music. Remember that Bing Christmas Classic, sing it with me bro;
' Ballbags slap against an open arse'
' Sleigh Bells buh buh buh buhbuh
WHERE IS FRANCIS SAWYER ?
a) Lying on a coroner's slab having been found hanging, hands tied behind his back with 2 gunshot wounds to the back of his head in his basement. Verdict Suicide(d).
b) Knees bent Ass out being interrogated by the IRS after a series of claimed boating accidents.
c) Appearing before a Senate committee after being cherry-picked by Hillary C as her first choice as Ambassador to Israel for 2016.
d)Seen the light and a shoe-in as deputy to Timmy G at Warburgs.
e) Drinking Vodka and fucking Russian whores at an undisclosed location near the black sea with Edward Snowden.
f) Hounded from website by zioshills.
Dude are you implying freedom of expression is banned on the WWW? Shit! First they came for. . .
...Little Hugh.
I do a search for all of his comments, and it comes up with nothing. Poor Mr Sawyer, I know how he must feel, as I have been banned from the Telegraph and Gamasutra myself.
in Scotland if your name is Hugh everyone calls you Shug.
Another one bites the dust.
I've got a great idea! Let's crush all dissent. Drive it underground and create one of those giant bubbles that i keep hearing about. Simples.
Worked well in East Germany until it didn't.
Yeah the globalists want to take over the United States of America, in fact many believe they have, but what is happening instead is that the structure is fragmenting. Soon corporations will control parts of the military industrial complex and advanced weapons systems and will be funding opposing mercenary groups around the world and in the United States of America. Basically a globalist clusterfuck due to the irresponsibility of those placed in power. They can't do a damn thing right and with today's tech they must be stopped. I believe people that are responsible and have power are taking steps to finally remove the cancer. We have all waited long enough.
I hope so man, but I sure ain't holding my breath.
Mostly, middle management are corrupt fucks, hoping to get more corrupt.
I pray I'm wrong.
"The QI Elves @qikipedia 35m
Adolf Hitler was Time Person of the Year in 1938 and he was nominated for the Nobel Peace Prize in 1939."
Just like Fuhrer der Nation in office today.
MAN of the Year. There were no "Persons" in 1938 because Metrosexuals did not exist they had MEN and WOMEN
http://www.mortgagestrategy.co.uk/news-and-analysis/politics/sfo-conside...
SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS
Well. Not one person has replied. I don't bite and always try to be a good person. And I love cats and I don't lie. Yes, it's very difficult living in this world surrounded by zombies. All of these here highly-educated, high-income males who live alone, and not one of them has answered my plea. Have all the decent people of the world been killed or made too scared to email a decent stranger who is clearly in need?
It's really not that difficult to extract my email from the PGP key posted here. And it's OK if you don't want to use PGP. And I really don't care what your handle here is, if any of the tech stuff too intimidating. Try wait, maybe it's ME who is intimidating because I show off my knowledge. But that's the whole Fight Club meme, and it's not me, or at least not always.
Let's try this again, please. And I'm gonna keep at it until I get at least one genuine response. I'm not just repeating the exact same post over and over again. It will keep changing and will be reposted until I get a civil answer. Mahalo!
Inmate of open-air prison run by lunatics and populated almost entirely by zombies is desperately seeking a pen-pal ... because Aldous Huxley gave someone to Winston Smith.
For mutual support in these trying times, am seeking fellow non-zombie intelligent, open-minded, and well-informed inmate for discussing topics of mutual interest, such as:
Both actual and notional nuclear accidents, and nuclear technology of all sorts. Is nuclear safety always an oxymoron? I'd love to find a fellow atomic scientist here, as in Bull. Atom. Sci.;
Same as it ever was. “Kill the man, kill the problem,” Joe Stalin. Change is a process, not an event. Chicken Little has always been wrong, so why not now?;
Same as it ever was. Bankers v. The People is nothing new. In 1833 Andrew Jackson took on and succeeded in killing the Second Bank of the United States. In 1963 JFK took on the Fed and was killed. The bankers will do “whatever it takes” to keep it going as long as possible;
Same as it ever was. Historical Revisionism of WW1 and WW2 as a battle of valiant truth-telling historians versus the plush OSS/CIA myth-telling “historians” as waged notably by the largely, and very sadly, forgotten Harry Elmer Barnes, 1889–1968. Many brave souls such as he have seen history through the lens of The Truth is First Casualty of War … and lived to tell the tale, or at least published before their death. Big Mahalo to the CIA for renaming the quaint (and hifalutin) pre-JFK historical revisionism into the much more catchy (and contempo) conspiracy theory;
Same as it ever was. John Kenneth Galbraith 1975 Money: Whence it Came, Where it Went about the Capitalist Crisis as predicted by Karl Marx. Four decades later and still going?;
Same as it ever was. George Orwell's intended title for his most famous book was “1948,” its year of completion, nuff said. 1984, Alice in Wonderland, and The Wizard of Oz as works of history – and Newspeak, shunning, straw man, murder, etc., as (largely) effective social controls;
zerohedge.com as an island of sanity, albeit very sadly wholly lacking in collegiality; and, most importantly,
weaknesses in the open-air prison system which might allow its escape and/or subversion, because a mind is a terrible thing to waste.
SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS