The Loss of Trust and the Great Unraveling To Come
by ilene - October 19th, 2010 11:04 pm
The Loss of Trust and the Great Unraveling To Come
Courtesy of Charles Hugh Smith, Of Two Minds
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?
The emotions will be familiar…
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WHALEN: BANK RESTRUCTURINGS LIKELY AS FORECLOSURES “OVERWHELM” BIG BANKS
by ilene - October 18th, 2010 1:23 pm
WHALEN: BANK RESTRUCTURINGS LIKELY AS FORECLOSURES “OVERWHELM” BIG BANKS
Courtesy of The Pragmatic Capitalist
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.
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Foreclosure Fraud: 6 Things You Need To Know About The Crisis That Could Potentially Rip The U.S. Economy To Shreds
by ilene - October 18th, 2010 1:05 am
Foreclosure Fraud: 6 Things You Need To Know About The Crisis That Could Potentially Rip The U.S. Economy To Shreds
Courtesy of Michael Snyder at Economic Collapse
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".
Then, when it…
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The Coming Collapse of the Real Estate Market
by ilene - October 16th, 2010 12:54 am
Here’s another great article on the frauds at the heart of the mortgage and banking sectors. – Ilene
The Coming Collapse of the Real Estate Market
Courtesy of Charles Hugh Smith, Of Two Minds
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…
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Foreclosure Fraud For Dummies, Part 3: What’s the Worst and Slightly Better Case Scenario?
by ilene - October 14th, 2010 4:02 pm
Foreclosure Fraud For Dummies, Part 3: What’s the Worst and Slightly Better Case Scenario?
By Mike Konczal, courtesy of New Deal 2.0
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,…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site