Chris Whalen

Other than that, everything is great ...

Who can list illegal things done by Hank Paulson? Bueller? Anyone?

We should be ecstatic that the Department of Justice is finally prosecuting fraud, right?

Unfortunately, it's just a p.r. stunt going after small fish and leaving the big criminals untouched ...

• Insider Case Has Soft-Dollar Focus (WSJ)
• Treasury 30-Year Returns as Market Bellwether as Fed Policy Propels Trade (Bloomberg)
• Portugal, Spain in crosshairs as Ireland bailed out (Reuters)
• Wall Street Shrinks From Credit Default Swaps Before Rules Hit (Bloomberg)
• Lee Says North Korea Must Pay for Attack; China Urges Talks (Bloomberg)
• Don’t Just Tell Us. Show Us That You Can Foreclose (NYT)
• Democrats Gird for Tax-Relief Battle (WSJ)
• What the UK is Contributing to Ireland (BBC)

Heck of a job ...

Its really very simple ...

Chris Whalen's latest Institutional Risk Analytics is a must read letter as it highlights yet another aspect of foreclosure fraud, one which finds various analogues in the way the MBS originating banks took advantage of AIG, knowing full well it was stuffed to the gills with worthless pieces of paper and taking out enough insurance on it to require a federal bailout when mark to fraud failed and mark to market finally worked for a very short period of time. Now, it seems, it is the mortgage insurers turn: "So today the MIs are still operating, though they are not providing insurance because they can't. Observers in the operational trenches tell The IRA that virtually no MI claims are being paid - even if the claim is legitimate. The MIs are very undercapitalized and still bleeding heavily. But they get continued business because the GSEs demand MI on high LTV loans. Lenders are forced to use the MIs and consumers are made to pay the premium. Thus the auditors of the GSE continue to respect the cover from the MIs, even though the entire industry is arguably insolvent." The question is how many CDS have Goldman et al purchased in bulk in anticipation of the imminent wholesale MI Event of Default, which will force Geithner to once again use the Mutual Assured Destruction wildcard and force taxpayers to bail out those holding MI insurance, especially if the originators and servicers end up being one and the same...

L. Randall Wray (economics professor), Christopher Whalen (banking expert with Institutional Risk Analytics), and William K. Black (professor of economics and law, and the senior regulator during the S & L crisis) explain ...

I don’t think commercial real estate is the big Achilles heel for these institutions right now because of the manipulations the federal government has undertaken. I think the real Achilles heel for all these banks, and for bond markets, is going to be the residential markets. Not to be overly dramatic, but this is a huge ticking time bomb. Things are getting worse, not better. - Andy Miller

Still more shenanigans ...

• Marc Faber Says World Heading for "Major Inflection Point" (Bloomberg)
• French Strikes Disrupt Air and Rail Travel (NYT, BBC)
• Jobless America threatens to bring us all down with it (Telegraph)
• Will they be paid in gold? Fed's latest reflation attempt comes via Wall
  Street, which is expected to pay $144 billion in bonus this year (WSJ) - this number represents 8% of M1
• Two Faces: Demystifying the Mortgage Electronic Registration System's Land Title Theory, Christopher Lewis Peterson, University of Utah (SSRN, h/t Karl Denninger)
• States to Probe Mortgage Mess: Attorneys General Hope Lenders Will Re-Write Loans With Troubled Documents (WSJ)
• Citigroup Stops Using Foreclosure Law Firm Facing Florida Probe (Bloomberg)

Got any better ideas?

"Ok, so all of this action in the market is ancient history and the bigger question is what happens next? What I find so interesting about sentiment right now is that it has done an complete 180 from just a month ago. Those that have bought significant out of the money protection on stocks are suffering big losses on their insurance due to the rally and the action in the VIX. From a sentiment and positioning standpoint, this was where the pain trade was into September and therefore it has happened. Bears are terrified to short and this notion that the soon to be extinguished Federal Reserve can prop up stocks forever has entered the psychology of investors and traders everywhere. This is DEAD wrong...What I find so hilarious is that no one seems to ask themselves why a big money manager might come on CNBC and tell everyone stocks can’t go down. Perhaps in a market with little to no liquidity someone needs liquidity to dump their garbage on some unsuspecting sucker. Based on the volumes in the market I shudder to think what happens if someone actually tries to sell positions in size." - Mike Krieger

Dealbook has compiled one of the best visualizations of the tangled web of where Wall Street's brass ends up after leaving their existing company a bailout burden to US taxpayers. Instead of facing perp walks, all the same players have merely engaged in the next round in the game of Wall Street musical chairs, and simply switched their corner offices: after all who is quite as qualified to lead the US economy into the abyss one more time? Is it any wonder then that as all the same people who got us in this mess are still busy collecting billions in bonuses, that the US economy and stock market will be led to yet another historic crash?

The erosion of the profitability of the U.S. banking industry over the past two years under the glorious Summers-Geithner-Bernanke rescue scheme is the proverbial fly in the ointment for both major political parties. Democrats and republicans alike are going to be fed into the meat grinder over the next several years as the banking sector deals with literally hundreds of billions of dollars in direct and indirect expenses from the deflation of the mortgage bubble. For the economy, this slow process of muddle along championed by Summers and Geithner will ensure that Barack Obama becomes the Herbert Hoover of the Democratic Party. The economic carnage that will causes these losses, as we described in a recent post in Reuters, "Double Dip or Global Deflation?," is going to represent the worst economic contraction since WWI. Forget WWII. Think "shrinkage" to use the Gilded Age description for economic deflation. - Chris Whalen