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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Phil's Favorites

Brief Summary of Friday's stock market action

 

It was a good idea from Paul Krugman on Thursday, but by Friday, hopes for a sane approach to economic matters all but disappeared...

What about calling off the trade war that has been depressing business investment? This seems unlikely, because protectionism is right up there with racism as a core Trump value. And merely postponing tariffs might not help, since it wouldn’t resolve the uncertainty that may be the trade war’s biggest cost.

The truth is that Trump doesn’t have a Plan B, and probably can’t come up with one. On the other hand, he might not have to. Who needs competent policy when you’re the chosen one and the ...



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Zero Hedge

How Negative Interest Rates Screw Up The Economy

 

By Wolf Richter via WolfStreet.com, as published at Zero Hedge

Now they’re clamoring for this NIRP absurdity in the US. How will this end?

This is the transcript from my podcast last Sunday, THE WOLF STREET REPORT:

Now there is talk everywhere that the United States too will descend into negative interest rates. And there are people on Wall Street and in the media that are hyping this absurd condition where government...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Kimble Charting Solutions

Bearish Divergences Similar To 2000 & 2007 In Play Again!

Courtesy of Chris Kimble

Does history at important junctures ever repeat itself exactly? Nope

Do look-alike patterns take place at important price points? Yup

This chart looks at the S&P 500 over the past 20-years.

In 2000 and 2007 bearish momentum divergences took place months ahead of the actual peak in stocks.

Currently, momentum has created a bearish divergence to the S&P 500 for the past 20-months, as the seems to have stopped on a dime at its 261% Fibonacci extension level of the 2007 highs/2009 lows.

Joe Friday Just The Fact Ma’am; A negative sign for the S&P 500 with the divergence in play, would take place if support b...



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The Technical Traders

Do Good Traders Make Good Gamblers?

Courtesy of Technical Traders

Without breaking the rules, have you ever made a trade that was guaranteed to make you money? A trade that was literally guaranteed to succeed.

If you’re struggling to come up with an answer, we’ll give you a helping hand, the word you’re searching for is likely no. Every financial trade ever made – no matter how sound and well researched using technical analysis – carries with it an element of risk.

Outside factors beyond your control always have the possibility of turning profits into losses and ecstasy into agony. In many ways, trading is similar to gambling. For instance, you may think you know ...



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Insider Scoop

Earnings Scheduled For August 22, 2019

Courtesy of Benzinga

Companies Reporting Before The Bell
  • Hormel Foods Corporation (NYSE: HRL) is estimated to report quarterly earnings at $0.36 per share on revenue of $2.29 billion.
  • BJ's Wholesale Club Holdings, Inc. (NYSE: BJ) is projected to report quarterly earnings at $0.37 per share on revenue of $3.38 billion.
  • DICK'S Sporting Good...


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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker

Everything awesome? Gold over $1500. Central banks are printing money to generate fake demand. Germany issues first ever 30 year bond with negative interest rate. Crazy times!

Even Australia and New Zealand and considering negative interest rates and printing money, you know a bunch of lowly populated islands in the South Pacific with no aircraft carriers or nuclear weapons. They will need to do this to suppress their currency as they are export nations, as they need foreign currency to pay for foreign loans. But what is next, maybe Fiji will start printing their dollar. 

Now for a laugh, this Jason Pollock sold for more than $32M in 2012. 





Ok, now call Dan...

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Lee's Free Thinking

Watch Out Bears! Fed POMO Is Back!

Courtesy of Lee Adler

That’s right. The Fed is doing POMO again.  POMO means Permanent Open Market Operations. It’s a fancy way of saying that the Fed is buying Treasuries, pumping money into the financial markets.

Over the past 6 days, the Fed has bought $8.6 billion in T-bills and coupons. These are the first regular Fed POMO Treasury operations since the Fed ended outright QE in 2014.

Who is the Fed buying those Treasuries from?

The Primary Dealers. Who are the Primary Dealers?  I’ll let the New York Fed tell you:

Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a ...



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Digital Currencies

New Zealand Becomes 1st Country To Legalize Payment Of Salaries In Crypto

Courtesy of ZeroHedge View original post here.

Bitcoin and other cryptocurrencies have been on a persistent upswing this year, but they're still pretty volatile. But during a time when even some of the most developed economies in the word are watching their currencies bounce around like the Argentine peso (just take a look at a six-month chart for GBPUSD), New Zealand has decided to take the plunge and become the first country to legalize payment in bitcoin, the FT reports.

The ruling by New Zealand’s tax authority allows salaries and wages to b...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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