Fannie Mae

Couple Lives In $1.3 Million, 4,900 Square Foot Home For Five Years Without Making A Single Mortgage Payment

Wonder how Americans can afford to buy millions of iGadgets, a second LCD TV for the shoe closet, and eat at restaurants more than almost any time in the past despite sliding personal income? Simple - increasingly fewer pay the biggest staple bill in a US household: their mortgage. The following story of Keith And Janet Ritter, who have lived in their Fort Washington, MD $1.29MM, 4,900 square foot McMansion for 5 years (which they purchase with no money down) without ever making a single mortgage payment, and who are not even close to being evicted, may explain much about the way US society currently operates, and why other perfectly responsible and hard-working taxpayers (who do have to pay for their mortgage) continue to fund tens of billions in Fannie and Freddie losses who are first on the hook to absorb the implicit losses by allowing families such as the Ritters to live in perpetuity without paying, and the banks to keep said mortgage on the books at par without any impairments.

Geithner Pens Another Ridiculous Op-Ed

Nearly two years after his catastrophic foray into Op-Ed writing, here is Tim Geithner's latest, this time making the hypocritical case to "not forget the lesson from the financial crisis"... which he himself ushered on America as head of the New York Fed. Frankly we are quite sure it is not even worth reading this drivel: the unemployed man walking has been a total disaster during his entire tenure (at both the New York Fed where he supervised all the banks that subsequently fell, and the Treasury), and we are fairly confident that reading anything written by this pathological failure will cost collective IQs to drop by 10 points at a minimum. Hey Tim: is there a risk the US can get downgraded? Any risk?

Frontrunning: February 24

  • U.S. Postal Service to Cut 35,000 Jobs as Plants Are Shut (BBG) -Expect one whopper of a seasonal adjustment to compensate
  • European Banks May Tap ECB for $629 Billion Cash (Bloomberg) - EURUSD surging as all ECB easing now priced in; Fed is next
  • Madrid presses EU to ease deficit targets (FT)
  • Greek Parliament Approves Debt Write-Down (WSJ)
  • Mentor of Central Bankers Fischer Rues Complacency as Economy Accelerates (Bloomberg)
  • Draghi Takes Tough Line on Austerity (WSJ)
  • European Banks Hit by Losses (WSJ)
  • Moody's: won't take ratings action on Japan on Friday (Reuters)
  • Athens told to change spending and taxes (FT)

Frontrunning: February 22

  • Obama Administration Said Set to Release Corporate Tax-Rate Plan Today (Bloomberg, WSJ)
  • Greece races to meet bail-out demands (FT)
  • IAEA ‘disappointed’ in Iran nuclear talks (FT)
  • Hilsenrath: Fed Writes Sweeping Rules From Behind Closed Doors (WSJ)
  • Fannie-Freddie Plan, Sweden FSA, Trader Suspects, CDO Lawsuit: Compliance (Bloomberg)
  • Bank of England’s Bean Says Greek Deal Doesn’t End Disorderly Outcome Risk (Bloomberg)
  • Greece Second Bailout Plan an ‘Important Step,’ Treasury’s Brainard Says (Bloomberg)
  • Shanghai Eases Home Purchase Restrictions (Bloomberg)

Guest Post: The Grand Game Of Perception Management

The task of the financial/political/media Status Quo is to convince Americans to overlook the abundant evidence of economic deterioration and focus on heavily juiced "evidence" of robust "growth." The game plan is this: if the Status Quo can convince you that the economy has righted itself and from here on in everything will get better and better, every day and in every way, then we will abandon financial rationality and start buying homes we can't afford on credit, cars we can't afford on credit and boatloads of stuff from China that we don't need on credit (of course looking cool is a "need," i.e. having an iPad to carry around). In other words, believing it is so will make it so. That is the essence of the campaign to stimulate "animal spirits" confidence: though the economy is actually tanking, if they can only convince us the Dow is moving to 15,000 and then on to 20,000, jobs are being created left and right and things are looking up everywhere, then the resulting piranha-like shopping-feeding-frenzy will create the expansion that is currently chimerical.

"Lehman 2.0" Imminent Warns John Taylor

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.

Frontrunning: February 16

  • Europe Demands More Greek Budget Controls in Bid to Forge Rescue (Bloomberg)
  • Moody's Warns May Downgrade 17 Global Banks, Securities Firms (Reuters)
  • Officials at Fed Split on More Bond Buys (Hilsenrath)
  • Greek deal delays pressure periphery (Reuters)
  • Talk, but No Action, to Break US Grip on World Bank Job (Reuters)
  • Greek Rhetoric Turns Into Battle of Wills (FT)
  • Greece Seeks Monday Bailout Deal, EU Questions Remain (Reuters)
  • US Lawmakers Announce Payroll Tax-Cut Deal (Reuters)
  • China Leader-In-Waiting Xi Woos and Warns US (Reuters)
  • China's FDI falls 0.3% in Jan (Reuters)

Guest Post: Bad Week For Freedom

It was a bad week for freedom loving people, but I believe there are enough patriots left in this country to change our course. We are being buried under a blizzard of lies on a daily basis. We have a choice. We can support the existing corrupt crony capitalist establishment (Obama & Romney) or we can declare war on lies, deceit and misinformation by rallying behind the only person who would truly attempt to reverse decades of corruption, sleaze, incompetence, bloat, debt accumulation, and a warped version of free market capitalism – Ron Paul. He is the only public figure willing to level with the American people and tell them the truth. Will we let the concept of truth fade out of the world? The choice is ours. 

“In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia. The very concept of objective truth is fading out of the world. Lies will pass into history.” –   George Orwell

Is The Foreclosure Settlement A Shadow Bailout For Broke California

Just over a week ago we highlighted the desperate plight of cash-strapped California. With a $3.3bn short-term 'hole', they were looking for cash-management solutions under every rock and hard place they could find. Today we hear that California joins the Obama bank foreclosure settlement enabling $18bn of bank-funded cash (implicitly via Federal Reserve/Government coffers) can flow to the left coast. Los Angeles alone will receive $4bn which while eventually wending its way down to the consumer (to be spent and implicitly spurring further economic activity or perhaps more likely to pay down other debt in this balance sheet recessionary environment), as Bloomberg asks, "Why should a taxpayer in Houston or Wichita bail out irresponsible California homeowners, banks and the state’s public employees’ retirement fund?" To add to California's 'aid', BofA has become the first bank to sign up for the 'Keep your Home' program where Federal dollars are given to banks to encourage them to reduce mortgage balances on struggling (over-levered and perhaps once greedy) California homeowners. Certainly it is a happy coincidence that perhaps a short-term cash crisis could be band-aided in the Golden State by this well-timed joining of California to the settlement.