The political class and Standard-Issue Punditry (SIP) don’t "get it": Americans have completely lost faith in their Financial Elites and government, for abundantly obvious reasons.
Anyone who believes the foreclosure crisis can be contained is deluded, because the real issue in play is the citizens’ trust in their government’s ability to govern the nation’s Financial Elites according to the rule of law. Clearly, our government has failed its citizens--utterly, completely, totally, at every level of governance (Federal, State, local) and at every level of oversight and regulation.
The bitter truth is that the nation’s Financial Power Elites are not constrained by rule of law, and as a result of this revelation Americans’ trust in their government and political class has been shattered.
Despite raising their voices 600 to 1 against the TARP and related bailouts of the nation’s Financial Power Elites (who stripmined the nation’s wealth from their investment banking and mortgage banking fortresses) in 2008, the government shoved trillions of dollars of bailouts and guarantees into private hands with pathetically little control in return.
In their rage at this abject, cowardly surrender of their government to the Financial Elites, the American people tossed the craven bankers-lapdogs Republicans out and replaced them with an untested young president who talked the talk and old-line Democrats.
All of whom proceeded to attach the same leash to their necks and become craven lapdogs of the Financial Elites. Less than two years after the inevitable meltdown of the Power Elites’ stripmining operation and its unprecedented rescue by the Federal government, the Financial Power Elites are once again caught flouting the laws of land as if the U.S. were a "banana republic" in which laws are "only for the little people."
And now the inevitable calls are arising for a "Federal solution" which will bail the bankers out of the foreclosure crisis with their ownership of the political class and the nation’s wealth firmly in hand.
The people have lost their trust in their government for good reason: it has betrayed their trust. The emotions being raised are beyond the understanding of the cowards and brown-nosers pulling the levers of governance: why are people so angry about some botched paperwork?
Chris Whalen of Institutional Risk Analytics provided some recent clarity on the foreclosure crisis and its impact on the banking sector. Whalen believes the foreclosure crisis merely proves that the credit crisis never ended and that the government “bought time” for the banks. That time is now running out and the banks simply do not have the capital, the earnings or the capability to absorb the losses in the pipeline from the continuing foreclosures. Ultimately, Whalen believes restructurings are likely to occur in 2011 as the U.S. government is finally forced to deal with the banking sector as it should have in 2009.
For more from Chris Whalen see his recent must see presentation at AEI.
The foreclosure fraud crisis seems to escalate with each passing now. It is being reported that all 50 U.S. states have launched a joint investigation into alleged fraud in the mortgage industry. This is a huge story that is not going to go away any time soon. The truth is that it would be hard to understate the amount of fraud that has gone on in the U.S. mortgage industry, and we are watching events unfold that could potentially rip the U.S. economy to shreds. Many are now referring to this crisis as "Foreclosure-Gate", and already it is shaping up to be the worst thing that has ever happened to the U.S. mortgage industry. At this point, it seems inevitable that some financial institutions will go under as a result of this mess. In fact, by the end of this thing we might see a whole bunch of lending institutions crash and burn. This crisis is very hard to describe because it is just so darn complicated, but it is worth it to try to dig into this thing and understand what is going on because it has the potential to absolutely decimate the entire U.S. mortgage industry.
The truth is that there was fraud going on in every segment of the mortgage industry over the past decade. Predatory lending institutions were aggressively signing consumers up for mortgages that they knew they could never repay. Many consumers were also committing fraud because a lot of them also knew that they could never possibly repay the mortgages. These bad mortgages were fraudulently bundled up and securitized, and these securitized financial instruments were fraudulently marketed as solid investments. Those who certified that these junk securities were "AAA rated" also committed fraud. Then these securities were traded at lightning speed all over the globe and a ton of mortgage paperwork became "lost" or "missing".
The system for financing mortgages and regulating that financing has failed, completely and utterly. The mortgage and real estate markets are now in collapse.
Yesterday I wrote about how positive feedback loops lead to collapse. Welcome to the U.S. housing and mortgage markets. As I have documented here numerous times, the entire U.S. mortgage market has already been socialized: 99% of all mortgages are backed by the three FFFs--Fannie, Freddie and FHA--and the Federal Reserve has purchased a staggering $1.2 trillion in mortgage-backed assets in the past year or so to maintain the illusion that there is a market for mortgage-backed securities.
There is, but only because the mortgages are backed by the Federal Government and propped up by the Federal Reserve.
The mortgage market is completely dependent on government guarantees and quasi-Government purchases of securitized mortgages. If the mortgage market were truly socialized, then the Central State would own the banks which originate, service and own the mortgages.
But then the private owners and managers of the "too big to fail" banks would not be reaping hundreds of billions in profits and bonuses. And since the banking industry has effectively captured the processes of governance (that is, Congress and the various regulatory agencies), then what we have is a system of private ownership of the revenue and profits generated by the mortgage industry and public absorption of the risks and losses.
Could anything be sweeter for the big banks? No.
The incestuous nature of the system is breathtaking. The Fed creates the credit which enables the mortgages, the Treasury guarantees the mortgages via Fannie, Freddie and FHA, the Fed buys the mortgages ($1.3 trillion in mortgages are on their balance sheet) and the private banks collect the fees and profits.
One of the core tenets of the Survival+ critique is the State/Financial Plutocracy partnership. There are many examples of this partnership (crony capitalism in which the State is the "enforcer" which collects the national income and distributes it to its private-sector cronies), but perhaps none so blatant and pure as the mortgage/banking sector.
But now the entire legal basis for that privatized-profits, socialized losses system has dissolved. The foreclosure scandal…
The foreclosure crisis is heating up. Will it all come crashing down, or can we find a way out of the mess? **This is Part 3 in a series giving a basic explanation of the current foreclosure fraud crisis. You can find Part 1 here and Part 2 here.
Right now the foreclosure system has shut down as a result of the banks’ own voluntary actions. There is currently a debate over whether or not the current foreclosure fraud crisis could explode into a systemic risk problem that imperils the larger financial sector and economy, and if so what that would look like.
No matter what happens, the uncertainty about notes and what is currently going on with the foreclosure crisis is terrible for the economy. Getting to the heart of this problem so that negotiations can be worked out is important for getting the economy going again. There is little reason to trust whatever the servicers and the banks conclude at the end of the month, and the market will know that. Only the government can credibly clear the air as to what the legal situation is with the notes and the securitizations.
But I want to get some unlikely but dangerous scenarios on the table in which this blows up. Bangs, not whimpers. The kind where Congress is pressured to act over a weekend. I had a discussion with Adam Levitin about how this could explode into a systemic problem.
Title Insurance Market Breaks Down
The first scenario involves title insurance, specifically a situation wherein title insurers decide to take a month off from writing title insurance even on performing and current loans to investigate what is going on with note transfers.
If that happened, there would be no mortgage sales (except for those involving cash) in the country. The system would simply stop. Everyone with an interest, from realtors to Wall Street to construction to huge sections of the economy, would face a major crisis from this short-term pinch. There would be a call for Congress to step in immediately.
You can tell that the title insurance market, which is largely concentrated and also holding very little capital to deal with a nationwide crisis,…
It’s always astonishing how funerals and memorial services can do two things to people. They make platform for public show and then they provide the opportunity for public speaking that knows no bounds in the hope that they will be remembered for eternity. Something that state funerals and public mourning have more than that is that the leaders, past and present, tend to flock to the ceremony in order to be viewed and counted amongst the solemn mourners and catch just a bit of the limelight.
Nelson Mandela died on December 5th and as the memorial service unravels today with leaders from around the world arriving in great exalted ceremony befitting in their belief to the high-status and rank, ...
Investors lost their enthusiasm on Tuesday as the December 13 budget deadline approached with more dysfunction on Capitol Hill.
The S&P 500 Index retreated from Monday’s record high on Tuesday, as investors watched another budget battle unfold in Washington, with the clock ticking down to the December 13 deadline. Although this latest battle appears less toxic than the previous episodes, investors obviously remained skeptical as the major stock indices fell into the red.
The Dow Jones Industrial Average (NYSEARCA:DIA) lost 52 points to finish Tuesday’s trading session at 15,973 for a 0.33 percent decline. The S&P 500 (NYSEARCA:SPY) fell 0.32 percent to close at 1,802....
Today was the second day of little or no economic news following the big flow of data on Friday, most notably the upbeat November Jobs Report. Following the 1.12% Friday gain, it's not surprising that, absent market-moving news, the US indexes would trade in a narrow range with the potential for some consolidation. That's what we saw in yesterday's fractional gain in the second narrowest intraday trading range of 2013 (the average of which is 0.86%). Likewise, today's modest decline of 0.32% within a 0.38% range also warrants the label "narrow" -- the 4th percentile of the 238 market days so far this year.
The popular financial press, always ready to explain the market, points to renewed concerns of near-term tapering on last week's stronger-than-expected economic news (e.g., ...
IEP – Icahn Enterprises L.P. – Shares in Icahn Enterprises fell 10% to $133.67 on Tuesday morning after the company yesterday announced the sale of 2,000,000 depositary units. Shares in IEP yesterday rose to an all-time high of $149.77.
The sizable move in the price of the underlying sparked heavier than usual options activity on the stock today, with overall volume approaching 5,000 contracts as of 11:20 a.m. EST versus average daily options volume of around 1,400 contracts. The largest increase in open interest in IEP options overnight was in the Dec $145...
There has been a lot of hyper-taper sensitivity of late, ever since Fed Chairman Ben Bernanke broached the subject of reducing the monthly $85 billion bond buying stimulus program during the spring. With a better than expected ADP jobs report on Wednesday and a weekly jobless claims figure on Thursday, everyone (myself) included was nervously bracing for hot November jobs number on Friday. Why fret about potentially good economic numbers? Firstly, as a money manager my primary job is to fret, and secondarily, stronger than forecasted job additions in November would likely f...
NorthStar Realty Finance (NYSE: NRF) today announced that its Board of Directors unanimously approved a plan to spin-off its asset management business into a separate publicly traded company in the form of a tax-free distribution. The distribution is expected to be completed in the second quarter of 2014 and will be comprised of common stock in NorthStar Asset Management Corp. ("NorthStar Asset Management"), a newly formed company expected to be listed on the New York Stock Exchange.
In connection with the proposed spin-off, NorthStar Asset Management will enter into a 20-year management contract to manage NRF. NorthStar Asset Management will also manage NRF's non-traded REIT business and own its broker-dealer platform.
Today, with very little market moving news, the S&P 500 closed at 1808.4, yet another new closing daily high. The index did touch the 1811 area on at least three distinctly different time slots creating a new resistance level. But after last week’s bevy of positive economic surprises, the sharp gain of 1.1% on Friday, leaving the index just a tiny point away from its ninth consecutive up week, we can’t be too quick to suggest today was a topping rally. For one thing, volume was quite low as traders seemed to be trying to sort out the odds on the earliest date of Fed tapering. Estimates range from this month to March and even later. But it’s going to happen…so why so much emphasis on when? Perhaps protection of end-of-the-year profits in so many fund managers portfolios? ...
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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.
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These rallies are becoming familiar. In early July we saw a streak of 12 of 13 sessions in a row up, early September 11 of 12, and mid October 11 of 13 (current streak). It is a bit uncanny the similarities and how the escalator goes straight up in vertical ascent as we see indexes come out of mini corrections during QE. So we are about at the same stage where the last two began to tire, so it will be interesting if this is similar or if the current consensus of the market that there is nothing to worry about until next year as the Fed and D.C. are both off the table and this 3% annual growth rate in earnings we are now seeing in the S...
Welcome to the fouth update of the IRA Virtual Portfolio. First I am going to summarize the current state of the Portfolio then I will get into all the activity we had during September expiration.
Profit and Loss – Net of closed positions the portfolio is up a total of $769
Market Commentary – Last expiration I said, "I would like to put a total of $20,000 to work by the end of SEP expiration. If the VIX pops up to around 20 I plan to put about $50,000 total to work." The market didn't quite reach the goal but I did manage to deploy $15,000 of buying power. I still feel the market is too high and expect a correction during October. If the vix pops up to around 20 I still plan to put about $50,000 to work. If a correction doesn't happen I still plan to have a total of $25,000 in buying power put to work by October expiration. Now on to the act...
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Come and get it! Read all about it! Biotechs, biotechs and more biotechs to buy buy buy for your portfolio! To date, almost 30 biotech companies have hit the market. Most of the time, there are fewer than 10-12!
For the last five years, biotechs have had issues obtaining offer prices above expectations. In 2013, that trend looks to be broken. According to BiotechNow, the offer prices are 4% above expectations! In addition, biotechs are going public with little more than a wing and a prayer (pre-clinical or Phase 1 data only). Really? What this means is that the drug or technology looks good in mice, rats, or dogs, etc, but there is no smidgen of evidence that it will work in humans. That's what is called an appitite for RISK!
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