Mortgage Investors To Bank Of America: We’re Pissed And We Want Our 47 Billion Dollars Back
by ilene - October 20th, 2010 4:50 pm
Mortgage Investors To Bank Of America: We’re Pissed And We Want Our 47 Billion Dollars Back
Courtesy of Michael Snyder at The American Dream
Everyone knew that the foreclosure fraud crisis was going to spawn a festival of lawsuits, and now it looks like it is already beginning. The New York Federal Reserve Bank is part of a consortium of eight large institutional investment firms that has launched an effort to force Bank of America to repurchase $47 billion worth of mortgages packaged into bonds by its Countrywide Financial unit. It turns out that most mortgage bond contracts explicitly require the repurchase of loans when the quality of the loans falls short of promises made by the sellers. As most of us know by now, many of these mortgages that were packaged together into "AAA rated" securities were actually a bunch of junk. But this is just the beginning. There are going to be hordes of lawsuits stemming from this crisis and it is going to take years and years for this thing to work through the legal system.
All of the big players in the U.S. mortgage industry are going to be paralyzed for an extended period of time by this crisis, and that means that buying a home and achieving the American Dream is going to become a lot harder for millions of Americans. Not only that, if mortgage lending institutions end up being forced to take back gigantic mountains of bad mortgages it could end up sinking a whole lot of them. The implications for the U.S. financial system would be staggering.
And it turns out that the effort by the consortium of eight large institutional investment firms to get Bank of America to take back $47 billion in mortgages is not the only action already being taken. An even larger mortgage repurchase initiative involving investors holding a total of more than $500 billion in mortgage debt is being coordinated by Dallas lawyer Talcott Franklin.…
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The Age of Mammon
by ilene - August 30th, 2010 12:09 am
"Never have so few, done so little, and made so much, while screwing so many." Jim Quinn
Courtesy of Jim Quinn of The Burning Platform
The Age of Mammon
“Financiers – like bank robbers – do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out.” - Mobs, Messiahs and Markets
As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.
These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920′s. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don’t find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political “fundraisers” to attend. You can’t be cheap when buying off your protection in Washington DC.
Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also. No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You…
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The Bernanke Cycle
by ilene - August 17th, 2010 8:45 pm
The Bernanke Cycle
Courtesy of Joshua M Brown, The Reformed Broker
“Eighty-one percent of the jobs lost in America were from small business,”
-Senator Mary L. Landrieu, (D) Louisiana and chairwoman of the small-business committee
One of my pet topics here is the utter neglect of small businesses, which have been completely ignored during the race to stimulate and reflate The Systemic Six banks. In a press release from something called Industry Source Network, this systemic neglect is given a name - The Bernanke Cycle…
The Bernanke Cycle works as follows:
1. Small business gets battered by the economy. The business is still profitable but less so than before.
2. The business sees its lending facility pared back or eliminated by their bank.
3. Small business cuts jobs, moves to a smaller building or stops future equipment orders so that their expenses reflect the reality of their new lower revenues.
4. These cuts also negatively impact other small businesses associated with the small business’ supply chain which gives the cycle a multiplier effect.
5. Small business owner takes their austerity program to their lender in hopes of restoring some of their lost borrowing capabilities. The lender looks at the lower revenues, layoffs and downsizing as a further deterioration of the business. The lender lowers the business’s line of credit even further.
6. The business now has to run on even less cash and is not able to replenish inventory at the levels needed to grow its business.
7. Go back to step 1 and repeat until the business becomes truly uncreditworthy and eventually becomes insolvent.
I couldn’t agree more, and I see very little being done to help, either nominally or tactically.
Source:
The Bernanke Cycle is Crippling Small Business (PRLog)
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ND20 Interview: Elizabeth Warren Says Big Banks Must Stop Blocking Reform
by ilene - July 13th, 2010 12:05 am
ND20 Interview: Elizabeth Warren Says Big Banks Must Stop Blocking Reform
Courtesy of Lynn Parramore at New Deal 2.0
Senate Dems are making the final push on financial reform this week, but will big banks really change the way they do business? Or will we still be pawns in a game rigged in their favor? I caught up with Elizabeth Warren to talk about the need to reform Wall Street culture, the pernicious influence of bank lobbies, and the debt-fueled threat to America’s middle class. **Warren will discuss these issues and more at this weekend’s Hamptons Institute symposium, sponsored by Guild Hall in collaboration with the Roosevelt Institute (details below).
LP: Has the financial crisis changed the culture of Wall Street?
EW: I would have expected the financial crisis to sweep through Wall Street like a hundred-year flood — wiping out old business practices and changing the ecology profoundly. So far, the financial services industry has seemed to treat the crisis like a little rainfall — inconvenient, but no significant changes needed. The real question moving forward is how the industry will respond to Wall Street reform and growing public anger. Will it react to all the new cops on the beat just by hiring more lobbyists? Will it continue to spend $1.4 million a day to beat back anything that could mean more accountability and oversight? Or will the financial services industry finally begin to rethink its business models, lobbying approach, and attitude toward the public?
LP: Have unregulated financial products slowed our economic recovery?
Let me put it differently: meaningful rules in the consumer credit market can accelerate economic recovery, I really believe that. Rules would increase consumer confidence and, more importantly, weed out all the tricks and traps that sap families of billions of dollars annually. Today, the big banks churn out page after page of incomprehensible fine print to obscure the cost and risks of checking accounts, credit cards, mortgages and other financial products. The result is that consumers can’t make direct product comparisons, markets aren’t competitive, and costs are higher. If the playing field is leveled and the broken market fixed, a lot more money will stay in the pockets of millions of hard-working families. That’s real stimulus — money to families, without increasing our national debt.
LP: Why is marketplace safety so much harder for people to accept than safety in…
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BILL GROSS: EVERY NATION FOR ITSELF
by ilene - June 30th, 2010 3:20 pm
BILL GROSS: EVERY NATION FOR ITSELF
Courtesy of The Pragmatic Capitalist
As always Mr. Gross’ monthly outlook is a must read:
It is this lack of global aggregate demand – resulting from too much debt in parts of the global economy and not enough in others – that is the essence of the problem, which only economists with names beginning in R seem to understand (there is no R in PIMCO no matter how much I want to extend the metaphor, and yes, Paul Rugman fits the description as well!). If policymakers could act in unison and smoothly transition maxed-out indebted consumer nations into future producers, while simultaneously convincing lightly indebted developing nations to consume more, then our predicament would be manageable. They cannot. G-20 Toronto meetings aside, the world is caught up as it usually is in an “every nation for itself” mentality, with China taking its measured time to consume and the U.S. refusing to acknowledge its necessity to invest in goods for export.
Even if your last name doesn’t begin with R, the preceding explanation is all you need to know to explain what is happening to the markets, the global economy, and perhaps your own wobbly-legged standard of living in recent years. Consumption when brought forward must be financed, and that financing is a two-way bargain between borrower and creditor. When debt levels become too high, lenders balk and even lenders of last resort – the sovereigns, the central banks, the supranational agencies – approach limits beyond which private enterprise’s productivity itself is threatened. We have arrived at a New Normal where, despite the introduction of 3 billion new consumers over the past several decades in “Chindia” and beyond, there is a lack of global aggregate demand or perhaps an inability or unwillingness to finance it. Slow growth in the developed world, insufficiently high levels of consumption in the emerging world, and seemingly inexplicable low total returns on investment portfolios – bonds and stocks – lie ahead. Stop whispering (and start shouting) the words “New Normal” or perhaps begin to pronounce your last name with an RRRRRRRRRRRR. Our global economy, our use of debt, and our financial markets have changed – not our alphabet or dictionary.
Source: PIMCO
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Why is US revolving credit decreasing?
by ilene - June 8th, 2010 5:00 pm
Why is US revolving credit decreasing?
Courtesy of Edward Harrison at Credit Writedowns
This morning David Rosenberg noted:
We also received the U.S. consumer credit data for April yesterday afternoon and the $1.0bln rise in total outstanding should be viewed in the context of the sharp revision in March (to now show a $5.0bln decline versus the initially reading of a $2.0bln increase). What really caught our eye in the guts of the report was the significant retrenchment in credit card usage. Revolving credit sagged $8.5bln in April and is down an epic $88.8bln in the last 12 months (-9.6%).
Rosenberg goes on to write that household sector demand for mortgages is at a 13-year low. His conclusion is that consumers have discovered frugality in the aftermath of the great noughties asset bubble. Certainly, revolving lines of credit are down. But the real question is who is doing the cutting – consumers or lenders?
I mention this because Rosenberg later notes that banks are still in deleveraging mode, questioning whether lenders or consumers are responsible:
Whether this is due to a lack of demand (the National Association of Credit Managers index fell in May) or supply, the reality is that banking sector is contracting and once the fiscal largesse is through the system, so will the economy. Banking sector assets contracted at a 10.8% annual rate and the declines were broad based:
- Residential mortgages fell 10.4% at an annual rate;
- Home equity loans of credit fell 4.5%;
- Commercial real estate loans slipped 8.9%; and,
- Consumer credit slid at a 16.6% pace (with credit cards down an amazing 24.8%).
I say it is more about lenders than consumers. After all, in the last post I wrote about the psychology of change, saying:
If something works, people keep doing it. The repetition creates a sense of complacency such that when people are confronted with the initial need to change, they resist. That means people don’t change unless they are forced to do so, making crisis inevitable.
-A few thoughts about the euro crisis and the psychology of change
I don’t think consumers are frugal in the least. Debt to GDP levels are not down substantially for households. If consumers were frugal, then why are premium priced non-essentials like iPads selling like hotcakes? Why until last month was the personal…
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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