The banks are screwed—again. Because of the same thing as the last time—the fucking Mortgage Backed Securities. People still haven’t figured out what this Mortgage Mess means—but I’ll tell you: If enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loan and keep their house, scott-free? Shit, that’s basically a license to halt payments right the fuck now. That’s basically a license to tell the banks to fuck off. This Mortgage Mess is a hurricane that'll make Lehman's collapse look like a spring rain. —Gonzalo Lira
Now that the Fed is officially targeting a path for the level of nominal gross domestic product, which is essentially the politburo's chief central planning task, and is just one step removed from what China does constantly by starting with a GDP assumption and trickling it down through the economy, it is only fitting that America, now on the verge of being a fully-blown communist country, is also abrogating property rights, courtesy of the much discussed foreclosure scandal. Dylan Ratigan provides a concise explanation of just how our bankers have managed to bring us to this last descent into central planning hell.
S&P finally chimes in on fraudclosure, and in combination with other recent weak data out of the home segment, now sees an additional 6-8% decline in prices through November 2011. "U.S. home sales and home prices aren't likely to improve as we move into the seasonally sluggish fall and winter months. Although the latest pending home sales, reported last week, showed a modest increase, generally slowing new and existing home sales in recent months, combined with declining mortgage purchase applications after the government's temporary tax credit for homebuyers expired at the end of April, lead us to expect the housing inventory to grow and home prices to fall in the months ahead. A range of other key factors are also weakening the housing market: An elevated level of short sales and distressed asset sales; a large backlog of shadow inventory that have yet to be brought to market; and a high national unemployment rate. The recent news that several major banks will delay foreclosures due to documentation issues may postpone the arrival of the backlog of distressed inventory to the market anytime soon. The foreclosure delay also supports our expectation that the housing recovery will be a slow one. Additionally, the latest U.S. housing futures suggest that home prices will decline another 6% through November 2011. Standard & Poor's economists expect similar price declines over the same period." And if you read through the end of the post, you will see that broad consensus among various sources is that over the next 12 months, home prices will decline by an addition 5.7-10.8%. So much for that "official housing bottom" in July 2008. Too bad QE2 can't inflate home prices as effectively as it can the price of NFLX, which is as the very heart of the problem.
The Robo-Signing Mess Is Just the Tip of the Iceberg, Mortgage Putbacks Will Be the Harbinger of the Collapse of Big Banks that Will Dwarf 2008!Submitted by Reggie Middleton on 10/12/2010 06:02 -0500
The media is staring at the wrong target. Each major media outlet is copying what is popular or what the next outlet broke as a story versus where the true economic risks actually lie. Here's what's truly at stake – the United States is now at risk of losing its hegemony as the financial capital of the world!
I'm sorry, but I don't see anyway out of this. With fraud absolutely everywhere in our banking system, like some advanced metastatic cancer, financial metabolism comes to a sickening stop. Nobody can buy or sell property. Nobody can trust any American financial institution. Money can't circulate. Nobody will be able to get any money. It won't be long before that translates into nobody getting any food. We may be a nation of clowns, but as Lon Chaney famously observed a while ago - when explaining his technique of horror movie-making - "...there's nothing funny about a clown in the moonlight...." - James Howard Kunstler
True story: A retired couple I know, Brian and Ilsa, own a home in the Southwest. It’s a pretty house, right on the manicured golf course of their gated community (they’re crazy about golf). The only problem is, they bought the house near the top of the market in 2005, and now find themselves underwater. They’ve never missed a mortgage payment—Brian and Ilsa are the kind upright, not to say uptight 60-ish white semi-upper-middle-class couple who follow every rule, fill out every form, comply with every norm. In short, they are the backbone of America. Even after the Global Financial Crisis had seriously hurt their retirement nest egg—and therefore their monthly income—and even fully aware that they would probably not live to see their house regain the value it has lost since they bought it, they kept up the mortgage payments. The idea of them strategically defaulting is as absurd as them sprouting wings. When HAMP—the Home Affordable Modification Program—was unveiled, they applied, because they qualified: Every single one of the conditions applied to them, so there was no question that they would be approved—at least in theory. - Gonzalo Lira
One definition of insanity is doing the same thing again and again and expecting different results. Unless the government substantially changes its approach, unemployment will keep rising.
Congressman Grayson: "Breaking and Entering Does Not Become Legal Just Because a Big Bank Does It. The Rule of Law Must Apply Equally to Everyone"Submitted by George Washington on 10/06/2010 17:32 -0500
Congress members Grayson, Conyers and Kilpatrick stand up ...
Some rather scary predictions out of Paul Farrell today: "It’s inevitable: Wall Street banks control the Federal Reserve system,
it’s their personal piggy bank. They’ve already done so much damage, yet
have more control than ever.Warning: That’s a set-up. They will eventually destroy capitalism,
democracy, and the dollar’s global reserve-currency status. They will
self-destruct before 2035 … maybe as early as 2012 … most likely by
2020. Last week we cheered the Tea Party for starting the countdown to the
Second American Revolution. Our timeline is crucial to understanding the
historic implications of Taleb’s prediction that the Fed is dying, that
it’s only a matter of time before a revolution triggers class warfare
forcing America to dump capitalism, eliminate our corrupt system of
lobbying, come up with a new workable form of government, and create a
new economy without a banking system ruled by Wall Street." And just like in the Hangover, where the guy is funny because he's fat, Farrell is scary cause he is spot on correct.
A round up of views on the currency wars ...
What Wall Street bears no relationship to any longer is its primary mission in the U.S. economy: to be a fair and efficient allocator of capital to worthy businesses and innovators to propel job growth while also providing a medium for allowing investors to buy or sell stocks and bonds of those businesses at a fair price.
Let's cut to the chase: Larry Summers is leaving the Obama administration because he simply could not destroy the US economy fast enough. Which is why the next director of the National Economic Council should not be allowed to do a half-assed job. With that in mind, here are the best replacements for the now vacant post as suggested by Bloomberg's Jonathan Weil.
Rather than trying to achieve some illusory political game by moving forward with another pretend scheme for the disposal of the stake in AIG, a scheme dreamed up in a hasty and ill-considered fashion, Secretary Geithner and the White House should start with a small but very important step, namely to reorganize the public stakes in AIG and other firms now held by the Fed.
Bernanke and his friends in the Treasury seem to be pulling a fast one on the world, inflating US assets and deflating US liabilities through a falling dollar, while giving the US companies a chance to fund themselves cheaply. The only ones who are harmed are not voters or, if they are, they don’t have many votes. However, those who own the most US assets and will be financing the US in the future can not be pleased by this. It might be that the Eurozone is short-sighted allowing the euro to rise (see A Race to Two Bottoms, September 23), but the US is not thinking about the long term either. This is a very short term game. If the economy does go into a recession next year, as we expect, equities will decline anyway, and the government’s escape will only be temporary. TARP II will need to be rolled out alongside QE II and many will be left with a sour taste in their mouths. - John Taylor
Bill Gross Proven Half Right (For Now): Fed's Kocherlakota Just Reduced His 2011 GDP Forecast From 3.0% To 2.5%Submitted by Tyler Durden on 09/29/2010 09:31 -0500
A week ago we wondered how it was that Pimco's Bill Gross, who is now rumored to be Larry Summers replacement as the QE infinity whisperer on the right side of President Obama, had an advance look into how the Fed will adjust its GDP forecast ahead of the general public. Today, we got the first half of the response: in a speech to the European Economics and Financial Centre in London, Minneapolis Fed president Narayana Kocherlakota has just lowered his GDP forecast from 3% to 2.5%. And most importantly, the Fed President's speech in decidedly QE-negative: our favorite quote on QE from a Fed president so far: "The Fed cannot literally eliminate the exposure of the economy to the risk of fluctuations in the real interest rate. It can only shift that risk among people in the economy. So, where did that risk go when the Fed bought the long-term bond? The answer is to taxpayers." Thank you Fed.