Posts Tagged ‘Countrywide’

The Next Financial Crisis Will Be Even Worse

By Brett Arends

The last financial crisis isn’t over, but we might as well start getting ready for the next one.

Sorry to be gloomy, but there it is.

Why? Here are 10 reasons.

1. We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, "liberals" and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.

2. No one has been punished. Executives like Dick Fuld at Lehman Brothers and Angelo Mozilo at Countrywide , along with many others, cashed out hundreds of millions of dollars before the ship crashed into the rocks. Predatory lenders and crooked mortgage lenders walked away with millions in ill-gotten gains. But they aren’t in jail. They aren’t even under criminal prosecution. They got away scot-free. As a general rule, the worse you behaved from 2000 to 2008, the better you’ve been treated. And so the next crowd will do it again. Guaranteed.

Read the rest here: The Next Financial Crisis Will Be Even Worse – SmartMoney.com.


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Does Our Economy Really Have to Run on Fraud?

Does Our Economy Really Have to Run on Fraud?

Courtesy of MICHAEL HUDSON, writing at CounterPunch 

William Hogarth's print published in 1721, satirising the South Sea Bubble. People queue to enter Devil's shop, while he cuts up Fortune. Clerics of various denominations gamble (1.foreground) People ride on wooden hobby horse. Honour is flogged in the stocks by Villainy and Honesty is broken on the wheel with self-interest acting as confessor. Engraving

What is the difference between today’s economy and Lehman Brothers just before it collapsed in September 2008? Should Lehman, the economy, Wall Street – or none of the above – be bailed out of bad mortgage debt? How did the Fed and Treasury decide which Wall Street firms to save – and how do they decide whether or not to save U.S. companies, personal mortgage debtors, states and cities from bankruptcy and insolvency today? Why did it start by saving the richest financial institutions, leaving the “real” economy locked in debt deflation?

Stated another way, why was Lehman the only Wall Street firm permitted to go under? How does the logic that Washington used in its case compare to how it is treating the economy at large? Why bail out Wall Street – whose managers are rich enough not to need to spend their gains – and not the quarter of U.S. homeowners unfortunate enough also to suffer “negative equity” but not qualify for the help that the officials they elect gave to Wall Street’s winners by enabling Bear Stearns, A.I.G., Countrywide Financial and other gamblers to pay their bad debts?

There was disagreement last Wednesday at the Financial Crisis Inquiry Commission now plodding along through its post mortem hearings on the causes of Wall Street’s autumn 2008 collapse and ensuing bailout. Federal Reserve economists argue that the economy – and Wall Street firms apart from Lehman – merely had a liquidity problem, a temporary failure to find buyers for its junk mortgages. By contrast, Lehman had a more deep-seated “balance sheet” problem: negative equity. A taxpayer bailout would have been an utter waste, not recoverable.

Lehman CEO Dick Fuld is bitter. He claims that Lehman was unfairly singled out. After all, the Fed lent $29 billion to help JPMorgan Chase buy out Bear Stearns the preceding spring. In the wake of Lehman’s failure it seemed to gain the courage to say, “Never again,” and avoided new collapses by bailing out A.I.G. – saving all its counterparties from having to take a loss.

Was this not a giveaway? Fuld implied. Why couldn’t the Fed and Treasury do for Lehman what they did with other Wall Street investment firms and stock brokers: let it reclassify itself as a bank so it could pawn off…
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‘New Deal for Wall Street’ Programs Subsidizing Subprime Lenders

‘New Deal for Wall Street’ Programs Subsidizing Subprime Lenders

trickle downCourtesy of Jesse’s Café Américain

Welfare for Wall Street is just another phase of the ‘trickle down’ approach that seems to be so popular with the financerati.

If "Cash for Clunkers" had involved subsidized loans for cars administered by the banks it would have been touted as the greatest thing since sliced bread by the coporate media and mainstream infomercials, instead of being slammed on a daily basis as a troubled, pointless giveaway program.

So now we have a new "Cash for Criminals" program from the finance friendly folks at the tarnished Treasury and finagling Fed as outlined in the story below, this time for those overpriced housing loans sold to underpaid, over-indebted consumers.

The housing market needs to clear, the losses need to be realized, and the debt must be written down or taken into default by the banks.

The banks do not wish to foreclose because this will force them to start marking down the toxic assets they still hold on their books.

The Obama Administration is doing a fairly good imitation of Japan Inc.

Washington Post
Subprime Lenders Getting U.S. Subsidies, Report Says
By Renae Merle
Wednesday, August 26, 2009

Many of the lenders eligible to receive billions of dollars from the government’s massive foreclosure prevention program helped fuel the housing crisis by issuing risky subprime loans, according to a report to be issued Wednesday by the Center for Public Integrity.

Under the $75 billion program, called Making Home Affordable, lenders are eligible for taxpayer subsidies to lower the mortgage payments of distressed borrowers. Of the top 25 participants in the program, at least 21 specialized in servicing or originating subprime loans, according to the center, a nonprofit investigative reporting group funded largely by charitable foundations.

Much "of this money is going directly to the same financial institutions that helped create the sub-prime mortgage mess in the first place," Bill Buzenberg, executive director of the center, said in a statement.

For example, J.P. Morgan Chase, Wells Fargo and Countrywide, which has been bought by Bank of America, are eligible to receive billions of dollars under the program,…

The report comes as the Obama administration is prodding lenders to do more to help borrowers. Less than 10 percent of delinquent borrowers eligible for assistance through Make Home Affordable have received…
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Countrywide Exec Warned The Fed On Toxic Mortgages

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Countrywide Exec Warned The Fed On Toxic Mortgages

Courtesy of Tom Lindman of But Then What?

Well, this is interesting. If you’ve read the SEC complaint against Countrywide’s Angelo Mozillo and other executives you probably noticed the name John P. McMurray popping up several times. He was the chief risk manager at Countrywide who saw the problems coming, alerted management and was promptly ignored.

It turns out that Countrywide wasn’t the only concern that had the benefit of his analysis and chose to believe in the tooth fairy instead. In 2006 he offered some of the same advice to the Fed.

From Reuters:

At a time when many in the U.S. home loan industry were offering money to almost anyone who walked in the door, John P. McMurray publicly warned about the risks of such lax lending.

McMurray pointed out the risks at the Federal Reserve Bank of Chicago’s annual conference on bank structure and competition on May 18, 2006 — less than a year before the housing sector and mortgage lending industry began collapsing, leading to a credit crunch that spread around the world.

Such lending practices also eventually collapsed Countrywide into a fire sale takeover and led to charges of fraud and insider trading being brought against company co-founder Angelo Mozilo.

McMurray’s presentation on the home lending boom contrasted with comments Federal Reserve Chairman Bernanke had made in the event’s keynote address about 90 minutes earlier.

Bernanke said home finance innovation did carry risk but provided significant net benefits…

At the Fed conference, McMurray gave an almost academic presentation that included 29 slides packed with graphics and charts on the risks and causes of mortgage delinquency.

He explained how larger loans, lower credit scores, higher loan-to-value ratios, and less required documentation from loan applicants were coinciding with greater delinquency, wrote Cabray Haines, who summarized the conference for the Chicago Fed Letter.

“McMurray pointed out that this finding is particularly worrisome, given the recent popularity of loans that require little to no documentation of borrowers’ income and credit history,” Haines wrote…

There is a little bit of “gotcha” in the article which is unfair. It’s always easier to see the error in battle plans after the fight than it is in the middle of it, but that doesn’t alter the


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Countrywide’s Mozillo Charged With Fraud By The SEC

Courtesy of Tom Lindmark at BUT THEN WHAT

Countrywide’s Mozillo Charged With Fraud By The SEC

You are probably aware that the SEC has accused former Countrywide CEO, Angelo Mozillo, and two of his chief lieutenants with fraud. The SEC complaint document makes for fascinating reading. It demonstrates that Mozillo and others were acutely aware and concerned with the risks they were running while steadfastly painting a different picture to investors and regulators.

Here are a few of the passages that I found captivating:

On 100% subprime loans:

Mozilo further stated that the 100% loan-to value (also known as 80/20) subprime product is “the most dangerous product in existence and there can be nothing more toxic and therefore requires that no deviation from guidelines be permitted irrespective of the circumstances.”

 Then, in an April 13, 2006 email, Mozilo informed Sambol, Sieracki, and others that there were numerous issues that they must address relating to the 100% subprime second business in light of the losses associated with the HSBC buyback. One issue in particular that Mozilo identified was the fact that the loans  had been originated “through our channels with disregard for process [and] compliance with guidelines.” Mozilo went on to write that he had “personally observed a serious lack of compliance within our origination system as it relates to documentation and generally a deterioration in the quality of loans  originated versus the pricing of those loan [sic].” Mozilo noted that, “[i]n my conversations with Sambol he calls the 100% sub prime seconds as the ‘milk’  of the business. Frankly, I consider that product line to be the poison of ours.”

On Option ARMs:

[w]e have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet. The only history we can look to is that of World Savings however their portfolio was fundamentally different than ours in that their focus was equity and our focus is fico. In my judgement, as a long time lender, I would always trade off fico for equity. The bottom line is that we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales. (emphasis added)

Finally, on November 4, 2007, Mozi


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Zero Hedge

America's Coldest Cities... And GDP

 

America's Coldest Cities... And GDP

Courtesy of Zero Hedge

As Q4 GDP data looms this week, we are reminded just how important 'weather' is in the narrative of economic growth in America.

Q1 may fare far worse as the last few weeks saw the East Coast of the United States endure a brutal winter storm which caused the deaths of 16 people. It also led to widespread power outages and the cancellation of thousands of flights.

As Statista's Niall McCarthy notes, thick snow is common in the Northeast during the long and dark wint...



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Phil's Favorites

Why Does Momentum Investing Work?

 

Why Does Momentum Investing Work?

Courtesy of Cullen Roche, Pragmatic Capitalism

When you’re choosing an equity market allocation I generally prefer to keep things simple – just buy a low fee global market cap weighted portfolio and call it a day. If you build your hedges (bonds or whatever) around that slice correctly then your asset allocation will match your risk profile and you’ll have a reasonably good probability of having constructed a plan that you’ll stick with and will work just fine for you over long periods of time.

One of the reasons why I like a market cap weighted stock allocation is because it’s a momentum strategy. Now, don’t get me wrong. I’ve ...



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ValueWalk

Hugh Hendry - The Arrogance And Conceit Of A Well-Formed Argument

By VW Staff. Originally published at ValueWalk.

This conversation with Hugh Hendry didn’t make it into the final cut of his recent Real Vision interview, so you’ll sure as hell want to see what did. Watch the Grant Williams series on Real Vision and become a great investor: http://rvtv.io/2Bncb0x

]]> Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

In the second of his new flagship series, Grant Williams travels to Saint Barthélemy in the Caribbean for a conversation with the founder of Eclectica Asset Management,...



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Chart School

Nasdaq Hits 15% Historic Price Action Highs as S&P Enters 10% Extreme Zone

Courtesy of Declan.

The Nasdaq joined the S&P at historic highs as it hit the 15% zone of historic price extremes (relative to its 200-day MA). The S&P went a step higher as it touched the 10% zone of historic highs; i.e. it trades at levels above 90% of historic price action dating back to 1950 - a sign there isn't much left to this rally. If it makes it to 2,874 it will be in the 5% zone, a zone last seen in February 2011.


The Nasdaq continued to accelerate past its most recent upside channel on higher volume accumulatio...

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Digital Currencies

Cryptos Are Crashing Again...

 

Cryptos Are Crashing Again...

Courtesy of Zero Hedge

From South Korean bank blocks to Bulgarian ponzi scheme shutdowns and a Bali bitcoin crackdown, you can take your pick as to what is driving the sudden plunge in cryptocurrencies this morning. Ethereum is back below $1000, Bitcoin is back to a $10k handle, and Ripple is down 30% from the weekend's highs.

Weakness began around 6amET but really accelerated at around 8am ET...

With Bitcoin and Ethereum breaking key support levels..

The catalyst for the move is uncertain at best with numerous headlines over the weekend:

OneCoin offices ...



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Insider Scoop

34 Biggest Movers From Friday

Courtesy of Benzinga.

Gainers
  • Forward Industries, Inc. (NASDAQ: FORD) shares surged 137.9 percent to close at $2.95 on Friday after the company reported the acquisition of Intelligent Product Solutions.
  • NuCana PLC (ADR) (NASDAQ: NCNA) shares climbed 41.55 percent to close at $20.51 as the company announced plans to initiate a Phase 3 study of Acelarin in front-line advanced biliary tract cancer.
  • New Age Beverages Corporation (NASDAQ: NBEV) shares jumped 22.5 percent to close at $3.92 on Friday.
  • ...


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Biotech

How Alzheimer's disease spreads throughout the brain - new study

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

How Alzheimer's disease spreads throughout the brain – new study

Courtesy of Thomas E CopeUniversity of Cambridge

Harmful tau protein spreads through networks. Author provided

Alzheimer’s disease is a devastating brain illness that affects an estimated 47m people worldwide. It is the most common cause of dementia in the Western world. Despite this, there are currently no treatments that are effective in curing Alzheimer’s disease or preventing its relentless progressio...



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Mapping The Market

Trump Admin Bans CDC From Using Words Like 'Science-Based,' 'Diversity'

By Jean-Luc

These are the policies of a theocracy, not a modern democracy:

Trump Admin Bans CDC From Using Words Like ‘Science-Based,’ ‘Diversity’

The Trump administration has prohibited the Centers for Disease Control and Prevention (CDC) from using words like “science-based,” “diversity,” and “transgender” in their official documents for next year’s budget, according to the Washington Post.

Senior CDC budget leader Alison Kelly met with the agency’s policy analysts on Thursday to announce ...



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Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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