85 Responses

1. GATORBAIT Said,

   Those guys should call my mortgage broker friend because he gave me better terms than those clowns……i guess mozillo really is a creep.

   Posted on June 10th, 2008 at 2:15 pm

2. PIST Said,

   What a tangled web he is in…
   Angelo Mozilo needs no help from Moe or this forum to see that Mr. Mozilo & CountryWide are digging themselves deeper and deeper into a bigger hole…and the trash keeps smelling worse & worse by the day… I do feel bad for those few employees who truly give a shit about the people, their families & their loans but for the others watch out Karma is a bitch.

   What happens when the Feds etc finish their investigation and close down CountryWide??? What happens to the people/borrowers who have loans with them???

   Posted on June 10th, 2008 at 7:47 pm

3. GATORBAIT Said,

   Friends of Angelo (FOA) is a deep and very tangled web indeed…. it even goes deep into the regulators in charge of the rules and enforcement. What was uncovered/revealed in the news report is only the tip of the iceberg.

   Remember Alfonso Jackson?…. The former head of HUD…. most people (the herd) have no clue as to the depth of this mess. You think the lending market was lax for so long by accident.

   You really want to place blame? Follow the money….the real money and not the small change made by what the herd has dubbed “first line of defense”…. complaining about some brokers BMW payments…..whether you like it or not they are also casualties in this disaster. Focus on those who have the G4 and multiple multi-million $$$ homes…. the real players. Follow the big money behind the cutain and you will find the real crooks you are after. The guy shaking your hand as he pulls you out of the plane. The rest are just unfortunate pawns in the much bigger end game.

   The govt will eventually step in to help subsidize the banks so that they will have incentive to work with borrowers. Most of the speculators the govt keeps saying they are worried would get help (moral hazard argument) have been pretty much wiped out or are about to be flushed so there will be less of this argument the next round of discussions.

   When the herd wakes up and understands that this game is much bigger than the RE agent, builder, mortgage lender/banker and oh yes that evil mortgage broker who supposedly gave bad advice for some measly commission. The commission made by the “first line of defense” is a tiny piece of the real pie that was gobbeled up in this game. Look how much has been written off by the big players and are still in business? Beware of more regulation as this will help those who made the most $$ the past 5 years and actually hurt the consumer. Imagine an enviroment with only 3 banks… jp morgan, bank of america and citi. Talk about cornering the market…if this happens get ready to pay through the nose and watch your orifices.

   i find it interesting that CW is being bashed like a pinata but Bank of America seems to not get any heat. BofA has been bank rolling Mozillo since he first started his company. When CW was on the verge of extiction last year, who stepped in and bailed them out?…BofA. The Fed was urged to reject the deal…BofA paid $18 a share for CW stock that has tanked ever since, it is now under $5…. and this has not drawn the ire of Moe?? Why did BofA do this? It is an investment for the deep connections Mozillo has with fannie mae and key decision makers…plain and simple. Why else would you pay $18 for something presumably worth much less unless there was something more valuable in the package. CW tactics have not changed and they are under the umbrella of a respectable bank now? BofA?

   The big banks (esp. chase) are being given a big gift and keys to the vault from uncle Ben and stand to make tons of cash the next 5 years or more.

   Mark to market performing assets at 20-30 cents on the dollar???…(or in jp’s case handed a portfolio of performing assets at 10 cents on the dollar) most of bear stearns portfolio the past year and a half was fannie mae paper…the best quality paper (most valuable in a normal market) you want to have in the MBS market……you will see a good portion of these portfolios end up actually returning 70 cents per dollar or more over the next 5 years.

   The next big bank in line to get their gravy is Citi….can anyone say lehman?? how about wachovia…or maybe JP will get that platter as well.

   The big dogs have just been handed a platter of future cash and if the herd would step back and think about this rationally they would follow the big money and buy some of this preferred stock that has not been diluted and put on fire sale, so that they will also cash in on the gift that has been given to the real players in the game. (don’t believe it…just put $50-$100 in the big 3 and see what type of return you will have in 5 years or less on that investment). Most of the big 3 banks stock prices are at 20-25 year lows….. hmmmmm …when most people’s brand of shirt is on clearence sale they will typically buy it, it is amazing most do not do the same with stocks.

   If you really want this market to work itself out, uncle Ben and his crew need to raise the federal funds rate about 1- 1.5% and you will see the price of oil drop like a rock (back to $100 or less), inflation recede and mortgage rates move much lower (well into the mid 5% range or lower).

   In the great depression 40%-45% of all homeowners were in default….at this point the rate is around 5% of homeowners….5% of today’s numbers is just a whole lot larger than back then so the foreclosure numbers seem staggering than the actual historical percentages would suggest. It is without question we are in the middle of a big crisis but step back and look at what is actually happening. There is a slight of hand occuring before our eyes…… all this discussion and focus about the mortgage meltdown is partially a veil to deflect the fact that the banking/mortgage market is being carved out for a select group. You will see this crisis is mysteriously over when the big 3 each have their cut of the pie.

   The lowest point for mortgage rates the past 2 years was 1/23/08 and ever since then rates have moved higher and the fed funds rate has been cut down to 2%….all the rate cuts have done is reduce the cost of money for the big banks to accomplish the consolidation of their piece of the pie and pummeled the rest of us….

   Just some food for thought….and truth to digest

   Posted on June 10th, 2008 at 10:52 pm

4. Lookinthemirror Said,

   Gator-

   Nice post….I think I will purchase some BofA stock! Ben will keep printing money until the “little guys” fail, and then the large corporations will own 99% of the marketplace. When that happens, there won’t be any competition, and they can charge whatever price they want. Gator, you have looked into the mirror!!! Nice analysis.

   Posted on June 11th, 2008 at 7:59 pm

5. GATORBAIT Said,

   I looked in the mirror and saw who was about to knife me in the back!!!

   Posted on June 11th, 2008 at 8:35 pm

6. GATORBAIT Said,

   thanks lookinthemirror,

   It seems everyone likes to bash CW, however with mortgage bankers like them now eliminated from being in direct competition with the big banks…it will hurt the consumer with higher fees and rates.

   What most do not understand or realize is that the investment banks and your ever friendly banker that most people trust their money with are the real crooks who developed the products and were buying the securities in massive proportion from countrywide, aegis, homebanc, etc and kept pushing them to originate even more. When CW indicated they were capped on what they could deliver due to guidelines…guess what……. the investors relaxed their standards even further. CW was a pass through mortgage company…Mozillo just developed a good system for delivering mortgages to the secondary markets.

   I wish people could get past their rage and rationally look at the big swindle happening right in front of us……

   Posted on June 11th, 2008 at 8:57 pm

7. Rick Said,

   That is very true. I worked at Countrywide and recall running into one of FoA loans. I asked my manager, “What’s an FoA loan?” She said, “Frieds of Angelo.” Now it makes a lot of sense.

   Posted on June 11th, 2008 at 11:48 pm

8. Lookinthemirror Said,

   Rick-

   You USED to work at Countrywide?? You were accusing me of working there??? Interesting comment…….now I know why you are so bitter.

   Posted on June 12th, 2008 at 2:59 pm

9. GATORBAIT Said,

   If you happened to be a CFoA (Close Friend Of Angelo)…then you got a decent deal……then there was the VCFoA’s

   it was a ladder system-

   FoA= Friend of Angelo
   CFoA= Close Friend of
   VCFoA= Very Close Friend of
   CFFoA= Close Family Friend of
   VCFFoA= Very Close Family Friend of

   Then you had =

   ILoA= In-Law of
   MILoA= Mother in Law of (not sure if this one was good or bad)

   Of course the above scale was for those on a first name basis for many others similar ladder just a little different-

   FoMo= Friend of Mozillo
   CFoMo= Close ” ”
   VCFoMo= very ” ”
   CFFoMo= Close Fam ” ”
   VCFFoMo= Very Close Fam ” ”

   then there was this category:

   EAMO = Enemy of ANGELO MOZILLO

   I had heard stories that through 2006-2007 that CW had a call center that was even calling and marketing the past clients of their own Loan Agents to refinance.

   They were doing this to their wholesale accounts and then, to keep the numbers up, began to cut the legs out from under their own employees.

   By doing this on the wholesale end it would sometimes trigger the repayment of the YSP paid to the broker for early repayment of the loan.

   CW was putting the screw to all….so to be an FoA may not have been that great.

   Posted on June 13th, 2008 at 12:47 am

10. Rick Said,

    The excesses of Countrywide have been in place for a long time, and the Fed and Wall Street ignored it as long as it served a purpose.

    Sometime in the late 1990’s, under the direction of Countrywide’s financial leadership, the rules for taking profit on servicing changed. Ask any Branch Manager at Countrywide when they were to have the loan ready for sale (if they had operations in branch), and they will tell you “within 48 hours of closing”. It was because they were booking the profit on servicing in a manner different from any other servicer. This is what put them in a position that by October 2000, they were almost sold. ABN/AMRO and Wells Fargo came very close to buying Countrywide. I am not sure about ABN/AMRO, but I am assuming they walked away for the same reasons Wells Fargo did. Wells had their accountants in the Countrywide offices doing due diligence, and for most of that time, could not figure out how Countrywide was deriving their bottomline. Wells Fargo did not come out and say Countrywide was using shady accounting practices, but they certainly alluded it was an accounting problem they wanted no part of.

    It was widely speculated that Countrywide would have to file for bankruptcy by April or May of 2001 if the mortgage market did not change. The country was in the throes of the Tech Bubble bursting, housing sales were flat, and more and more corporations were eliminating good paying jobs here in exchange for goods to import.

    The Fed lowered interest rates in the first week of 2001.

    By the end of the January 2001, at least one Countrywide branch I know of had 900 loans in their pipeline, the majority refinances. For comparison, in December 2000, their pipeline had only 150 loans. It was the lowering of interest rates in 2001 that saved Countrywide from going under. They were turning over their own portfolio and getting up to 2.5 - 3 points per loan extra cash. From there, Countrywide went out and created agreements with large independent and regional lenders to buy all of their loans. By the end of 2003, Countrywide had almost tripled its servicing portfolio.

    The Fed had nothing left to work with except manipulation of rates to keep the flame going. Wall Street loved it because they had expanded the use creative financial vehicles and were selling derivatives to the hungry bond market looking for yield because the Fed was artificially keeping rates low, which effected Treasury notes lower. Countrywide became the ‘go to’ people for more new loans. Unfortunately, the guidelines became so lax, what was once considered sub-prime was now considered prime.

    But Wall Street didn’t care as long as the risk was passed off to investors.

    The Fed didn’t care as long as the markets appeared strong.

    Countrywide didn’t care, their stock was zooming and they were the ‘toast of the town’.

    The most unfortunate set of circumstances is this - the profit that was taken by the originators, then lender, then Wall Street, cannot ever be retrieved. That means, as property values go lower, you must also calculate into the total loss the percentage represented in profit paid along the way. So, in effect, the loss is far greater than just the reduction in property value.

    Every time the Fed steps in to “save” a financial institution it is with taxpayer money. Even though those financial institutions profited from the sales of not only loans but all the creative financial vehicles as well. The money represented by Treasury Notes held at the Fed that is used to “save” a bank must be replaced by the Federal Government, even though the Federal Government did not own those bonds.

    What?!? What does that mean?? It means this - the currency is controlled by the Fed, but the Fed is not controlled by the government. So, when they use Treasury notes, which are owned by the banks, the Federal government must replace those bonds, buying them with tax money.

    That’s right. The Fed, divided into twelve regions, each ruled by a “Governor”, is owned by the banks in that region. How the banks own it is they are required to buy a certain amount of US Treasuries, under a complicated formula, which the Fed holds, and the banks can borrow against and claim as part of their asset base. What this means, is that the Fed cannot be told what to do by the Executive Branch of this country. The Legislative branch can change the parameters, ie rules, that the Fed operates under, but everybody knows what a clusterf##k congress is. It’s amazing they can find the bathroom. So, of course, the Fed has no worries there.

    No, the largest shareholders of the Federal Treasuries at the Fed, control the Fed. If the CEO of Bank of America tells Ben Bernanke to jump, he can only ask how high. Everyone should stop and ponder this. Do not wonder why the Fed backstopped the Bear Stearns deal.

    Yes, Chase would have been in trouble too due to counterparty exposure, Everyone of the big banks and investment banks would have. It does not remove the fact that Bernanke was only doing what his true boss, the CEO of JPM Chase, told him to do.

    That leads us to misperceptions of Bank of America and Countrywide. Everyone wants to make a big Deal about the $2 Billion last August that Bank of America put into Countrywide. Well, it wasn’t even their money, but that is another story. HOW ABOUT THE $9.5 BILLION CHASE PUT IN THE WEEK BEFORE?

    That’s right. The PR machine that is Countrywide, in that previous week, put out the statement that a consortium of over 40 banks had extended them a line of credit of $11 billion, on which they drew the full amount. Yeah, 40 banks, when $9.5 billion was from one bank. It’s true, the 10K is there for everybody to read, and has been since last August.

    That doesn’t even come close to the precarious position Countrywide has placed the Federal Home loan Bank system. It will take quite a few tens of Billions of taxpayer money to replace the losses realized from Countrywide loans there also.

    Those who think Countrywide bashing is unfounded are, well, they just don’t have enough information yet.

    Hell, I’ve been doing it for many years, and have the letters from Countrywide’s legal department, threatening legal action against me, to prove it. Funny thing is, I haven’t stopped. My lawyers have said I don’t need to, I got the first letter in 2003.

    So Moe, keep on getting the message out about Countrywide and its leaders. Maybe the public won’t so easily support the next ‘Countrywide’ to come along.

    BTW - There might be several people in the world with the name Rick. And some may have had the misfortune of working for Countrywide. I am not one.

    Posted on June 13th, 2008 at 11:18 pm

11. GATORBAIT Said,

    The FED did not ignore CW they simply allowed CW to operate as they did for the banks agenda until the flow of wealth was moving out of the big banks.

    I am not sure which Rick you actually are but you are, as you know, on track to the facts more than the other rick posting on other subjects..who is the rick just a few above this post who indicated they worked at CW?

    As I have been saying CW was basically a pass through entity to deliver to end investors. When the secondary market shut down in 2007 it basically killed off the likes of greenpoint, aegis, first magnus and many others who had such agreements you mentioned above. these were all shell operations to deliver most of the alt-a and option arm paper. All these entities were financed by the same banks that backed CW. What is key is that the mortgage market was run by lines of credit given to mortgage bankers/IB’s so that they could finance the paper until it was sold off or packaged in some instrument. From my perspective the meltdown all started due to the banks cutting off lines of credit to the mortgage bankers and IB’s. This created the wicked spiral we have now been in for the last 1.5 years. What is amazing is that this “fear” that most performing assets will default. I go back to my contention that until an asset is non-performing then there really is no need to mark to market the asset until there is actually a buyer for that asset. The MBS market along with the CDO/SIV and LDO market will slowly come back and then these assets will have a real value once again and not an assumptive value of 0.

    If the asset is non-performing then I can understand the requirement to mark to market that asset for valuation…but even in a “normal” market you still had buyers for that defaulted asset worth greater than 0. It is just amazing to me that all the assets below level 1 are now required to be valued in a market with no buyers….you have to agree that a performing mortgage has >0 value. Even a defaulted assets has a value >0. From what I have read the default rate is not as great as the markdowns have been. So this means that all those performing assets that were writtendown the past year will actually have a greater value sometime in the future than the declared loss value….correct? So again this helps the big banks…esp the banks who acquired downtrodden IB’s (JP-Bear) or mortgage bankers(BofA-CW)

    The requirement to now mark to market the off balance sheet assets is clearly meant to help the big banks because they have the capital to survive all the mark downs for lack of buyers.

    The IB’s have to go hunt for capital and in many cases have to ask for capital/credit from the very competition that is trying to starve and kill them off….The FED has allowed the big IB’s to stay in the game if they can acquire the capital and by opening up the discount window to them as well (for now)…as those in the industry know….most banks do not go to the discount window because this usually means thay have severe capital issues. From what I have read the IB’s are basically the only entities swapping at the window.

    My point is simple - CW has become the whipping boy, (i am not a fan of CW by any means) when the real focus should be the fact the big banks were and still are the real culprits behind the curtain. I sense that once the other 2 big banks (citi and wells)get their cut of the re-distribution and control of wealth the housing market will miracleously stablize and lending will again be more available. Just listen to the FED now— raising the Fed Funds rate…this has been clear this needed to be done since Feb when the mortgage market sold off. If the banks are so concerned about the housing issue then they should be refinancing the daylights out of all the distressed homeowners who are left begging for help. Most of the “moral hazard” borrowers (investors) have walked away or are about to walk.

    CW is guilty in many different ways but basically they are a scap goat and a face for the public to bash. It is very important that those being burned understand who started the fire. As I had said the FED’s main agenda (the real one) is to prop up big banks to control the flow of wealth.

    The public needs to understand this and follow the money….keep your eye on the big banks, CW was just a conduit. Only when Mozillo steered CW from it’s original role and sold to IB’s did the wheels start to come off. You started to see packages of performing mortgages known as “scratch and dent” files being returned for buyback for no apparent reason. As it turned out the IB’s lines of credit were being cut off by the major banks. (for “concern” of defaults that had not yet happened) Follow the money…the big money…

    who benefited the most from the housing boom and then started to lose the big profit margins?…. Who stands to benefit the most from the chaos now?

    I will say it again, Mozillo’s connections are very deep and we have just begun to see the depth of who had a hand in this fiasco. All up and down the halls of Fannie mae, HUD, FHA and even key regulators……

    Print the Friend of Angelo ladder above because you are going to need it as more and more is revealed..

    just this am Sen Dodd is now linked as a FoA…

    Posted on June 14th, 2008 at 1:55 am

12. Rick Said,

    I just read the lovefest between Gator and iliketolookatmyselfinthemirror. Gotta say something.

    Financials are a “BUY”????? What an idiot. Short all of them. A couple of them might be a buy in a year, not now when you can make money on the way down. Just wait until election time, when the waterfall appears and you have no paddle.

    No, it’s not because of the election, the games of hiding the sausage (losses) will be near its end run. The banks can only do it for so long. As their non-performing assets pile up, they have to raise capital reserves. Most of the banks just can’t issue any more stock without forcing the dilutive effect of a dive to take place. As the stock price goes lower, they have to increase the number of shares held in reserve. It is an ugly cycle.

    Get a clue! When a bank says one week they are in great shape, then issue new stock the next week, it means they lied. They are so bankrupt they are hiding losses, and desperately trying to raise capital, praying the market comes back.

    It is a firm grasp of the obvious to single out Lehman. The only thing you were right about is that Bear Stearns was structurally in better position because of the debt it bought than Lehman. But they still went bankrupt. Lehman is the single largest holder 2006 subprime originations. Can you day KABOOM! Merrill is almost in the same identical boat. They are the second largest holder of 2006 subprime originations. Both are bankrupt as we speak, if they were forced to bring level 3 onto the balance sheets, they are underwater by several times their assets. It ain’t even close.

    But don’t be fooled by thinking CDO’s, which are the safest of the derivatives, will be returning 70 cents on the dollar. That is lunacy. They already have lost, on average, 40% of their value, and that is if housing prices go back to January 2006!
    Once the auditing and valuations proceed, if there is a market for them, the underlying property values will have declined 30% on average. So with two of the five tranches already completly wiped out, which means an unrecoverable 40%, take 30% off that. That is best case scenario!

    And don’t get me started about CLO’s and CMO’s, which both have credit card debt, student loan debt, auto debt all in one stinking pile, and all of it setting record default rates.

    Now, start speaking about the alphabet soup of swaps with the Fed. The banks are taking credit card debt, that because of the new bankruptcies rules they shoved down congress’s throats, they can’t easily write down, and packaging it as new bond securitizations. They are swapping a pile of debt that alreday has a 50% default rate, and swapping it with the Fed for good US Treasuries!!!!!!!!!! Your tax money will go to replace the losses of the Fed.

    I am not a democrat, but I will say this, the whole thing happened on the Republicans watch. They had the whole shooting match for 6 years, and that was when the real cheating occurred. So much for fiscal responsibility. Hey Georgie………

    The FDIC has increased the number of employees it has by more than 50% since March. They want to increase that by another 30 -40% by the end of the summer. The FDIC, not me, says they expect at least 150 bank failures over the next two years, and it may be as many as 300. If the FDIC is getting ready for it, don’t you think you should too?

    You gotta remember, during the S&L crisis, bank rules were different. In Texas, if a bank in Dallas wanted to open a branch in Houston, they had to get a seperate commercial license for it, because it is in a different county. It was also considered a seperate bank in the S&L tally, even though it was just a branch. I believe a total of 580 banks were taken over by OTS in the 1980’s. With how banks are today, and how the rules are different on how they will be counted, it is easy to guess that well over a few thousand locations will be taken into receivership.

    Yeah, buy financials.

    WTF!!!! Get a CLUE! Telling people to buy Financials. What an idiot.

    Only someone pretending would say otherwise, because the numbers don’t lie. In the end, it doesn’t matter who you like or not, the numbers can’t lie, only people can.

    Posted on June 14th, 2008 at 2:11 am

13. Rick Said,

    Countrywide is not a scapegoat.

    When one monkey starts to do something, they all do it for fear of losing out on something. It was the same with risky loans. Once Countrywide began to loosen its guidelines, and gain marketshare, all the other lenders had to follow suit or lose their marketshare. It is that simple. Countrywide is only getting what it deserves. Its leaders should be forced to return all income to Fannie and Freddie for losses on loans Countrywide said were prime (and were not) and be made an example of (jail).

    The big banks have long chagrined the fact they must participate in the wholesale arena. They hate that they get beat up with their own product in their own footprint by brokers. But they have to play the game, or lose marketshare.

    that will end soon. When the application stream dies down enough, they will drop rates so low that wholesalers such as Flagstar and OSB will not get an app for two, four or however many weeks it takes to drive out as many brokers and middle tier and independent lenders as they can. It will be collusionary.

    You are not completely wrong. But you insist on trying to be more right. You are about halfway to getting it, but you refuse to learn. And you only respond in a positive manner if someone strokes you. We actually agree on a lot, but, again, you are stuck thinking you have to be more right.

    This is my lifes work, and I started with a brokerage firm in the midwest as their negotiator with Fannie, Freddie and Ginnie. I believe I know the system really well. From the inside. I don’t mean to pat myself on the back, it is just you try to call me out on premises that are not true. When you begin with a false premise, your chances of a correct conclusion are slim.

    Posted on June 14th, 2008 at 2:43 am

14. GATORBAIT Said,

    WOW….So which rick are you…??? the sane coherent one or the hit and run artist??….

    so much negative energy in your rant it is almost impossible to begin.

    Is it at all possible for you to have a legit conversation with out lashing out for some inadequacy you seem to have…I am not sure who stole your wallet but it is time to either forgive or forget.
    Find which parent did not hold you enough and forgive them…for your own health.

    The banks going bankrupt are who exactly?? maybe the r e g i o n a l s….why …commercial exposure not residential.

    The FDIC has mostly the regionals on the watch list.

    So you predict 80% of the mortgage backed paper (MBS) will go belly up and be worth 0? That a few thousand banks will be defunct? It seems goldman, blackrock, and sam zell seem to disagree with that analysis. I bet they are all idots since they are stepping into the financials (banks not brokers as i have said)?? Where do you bank with your billions??

    You are basically proving my point…I am pretty confident that JP morgan, Citi, BofA and Wells with not only be left standing but have acquired the best of the bunch left.

    Based on your rant you anticipate over 50% of mortgages will default in this country?? Based on what trend??

    As far as financials….who told people to buy financials??? please let me know….who said put any money in brokers like merrill, lehman or any other IB at this point. I believe the deck is stacked against the brokers(IB) and that the big banks will be left standing with the money.

    You seem to be delusional about what you read based on your attacks. Could be a comprehension issue.

    I said put some money in the big 4- ….Jp morgan, Citi, BoA and Wells. I am confident that all 4 will be worth quite a bit more in the next 5 years after this transfer of wealth the FED is helping to create is complete.

    You seem to disagree….is your prediction the big 4 above will be ko’d and BK’d. Please pass along your forcast…not just you screaming about the end of the financial system but where we land after and when. Please… your facts and not an irrational rant that contradicts basic economic fundementals….

    Also you mentioned a few thousand locations will be taken into receivership. this is your analysis?? I have not read anywhere in this country or elsewhere the number is anywhere near a few thousand. Are you talking in this country or the planet you seem to dive bomb from.

    FYI= Sheila Blair, Chairman of the FDIC states:
    “There are 76 banks on the troubled-bank list, and most
    of those will be nursed back to health or be acquired by
    stronger institutions rather than fail. Plus, those 76
    banks represent $22 billion in assets out of $13 trillion
    overall. That number could go up, but we would still be
    well within historical norms and far below the number we’ve
    seen in other troubled times. To put things in perspective,
    there were 1,500 banks on the troubled bank list in 1990.”

    Also the FED is actually cornering the market to control the shift of wealth…but that is a lesson for another day.

    So rick what is your forcast?? Your Advice?? based on your rant it seems we are set for a 10 year depression….is that your feeling? really rick…i mean really???

    There is clearly a babbling idot in the villiage and it is becoming quite obvious who it may be……

    Posted on June 14th, 2008 at 3:42 am

15. GATORBAIT Said,

    Rick ….

    I only gave my opine of what i know, read, studied and the industry I have been in for many years myself. I see what the fundementals show…I do not declare I am more right, just that i disagree with the tremendoulsly grim outlook you seem to pose. Not to mention the rants and name calling and bashing for any opinion in contradiction to yours…

    i support my view from facts, insight and market info that has been developing the past 2 years….

    Countrywide did not loosen the standards or guidelines….the marketplace did. CW was a conduit and held very little paper compared to what was originated….just look who was buying the paper.

    greenpoint, aegis, first magnus, etc was selling & transferring, whatever you want to call it, a bunch to CW who in turn the passed it on…The Investment brokers- lehman, merrill, & bear are who first relaxed the MBS guidelines to facilitate the CDO’s and funnel through their siv alliances. If you dealt in this arena you know this.

    Bear was the house that came up with the 5 year fix pay option arm to demand a higher yield on the secondary market. Then these broker houses bought up the subprime lenders like candy.

    I am all for beating down the devil but it did not start with CW or will it end with them…. As far as I knew the banks hated that the investment brokers were getting into the mortgage game taking market share and shipping off shore…that is when i noticed the relaxed standards were really too far gone.. to the point fannie mae was scrambling to hold on to their market share. Fannie mae was buying opt arm paper at the worst point in the trend….crazy.

    Although I am a bit concerned about this reverse mortgage revival…

    You do not have to worry about flagstar…they have positioned themselves for the FHA boom about to hit.

    As far as mortgage brokers….they will continue to be around….this is the market a real professional earns their medal. With the constant changes, the inhouse bank LO doesn’t stand a chance…he is in training 80% of the time now and is slow to react to lock in a rate when the market moves the way it has been the past year.

    Now that most of the dirt balls that jumped in the past few years have been kicked in the teeth and ran for the hills….The brokers who are left standing are going to be an asset for those who need the most help.

    Yes I know it is hard to believe…just like not all lawyers are sharks…not all brokers are thieves and drive a BMW.

    Posted on June 14th, 2008 at 4:15 am

16. Rick Said,

    Now Gator, read this carefully and digest before you respond. As I have said, there are a few points you make conclusions with that are false. I only wish to inform you. One is securitizations. You seem to think CDO’s and MBS are the same. The other is that the deck is stacked against any bank or brokerage. It is not. They made bad financial decisions, and should and will pay the price. Some are being bailed out, even though they created the mess. No one is a “sacrificial lamb”. These are big boys that played, and they should have known the risks.

    Yes, Chase, BofA, Citi and Goldman will stay through the coming storm. The first three are the largest shareholders of Federal Treasury reserve notes, thus the Fed will protect them before all others, and use taxpayer dollars to replace losses on Treasuries while doing so. Goldman will stay by sheer connection, they have positioned past employees well throughout the Fed and Treasury, and, yes, you are right, they are no dummies.

    But are you saying that the system is fair? Are you saying the average person can expect the same help if they lose a significant portion of their investments?

    Only if the average person gets the same financial help the big boys get can their stock value go up the way you describe. A success will be if they remain level, but the real value will have gone down due to printing of extra dollars. You are not factoring the real loss of value, the rise that has yet to be seen in metals, and the devaluation of many currencies. For the next 5 years, there are better places to hide money than the top financial stocks. Starting three to five years from now will be the time to again put money into them.

    My view has been shaped over twenty years following this. I began talking of the pitfalls of derivatives since 1998, after LTCM. At the same time, 1998, Phil Graham got the bill passed that removed Glass-Steagall. That is what caused all of this to happen. The proliferation of derivatives based on MBS, and the subsequent expansion of level 3, could not have happened without the removal of Glass-Steagall.

    More important and to the point, the Fed, since it is owned by the largest banks, is not there to be the champion of the middle class, but to serve the interests of those who own it. The only way to prevent the circumstances we are in from happening again, is to eliminate the Federal Reserve system. They, by function, can only create asset bubbles. They have no other function.

    Believe this, we are at the edge of a cliff right now. Commercial Real estate has historically always lagged residential by 12 - 18 months. we are at that point now. You are correct in pointing out the regional banks are the main target of the FDIC concern, because their exposure is great. More than 30% of regional banks have exposure to commercial real estate loans that exceed their hard assets by 200%, 300%, 400% and more. But don’t forget about the big banks.

    Most of the twenty largest banks have exposure to derivatives and blown MBS representing 300%, 400% and some many more times, their hard assets. Hell, Chase is the single largest holder of derivatives in the world. There are somewhere around $600 Trillion in derivatives, globally. Most are built on the backs of US MBS. In Sept 2007, Chase had $92 Trillion in derivative holdings, almost 1/6 of all derivatives. Their hard assets in Sept 2007 were $ 1.3 trillion.

    This is why I have said you are halfway there. Even with only a haircut of 5%, on paper, they are insolvent. The losses on derivatives, as a whole, will be no less than 50% across the board. They are bets on the performance of MBS. The derivatives do not own the mortgages, they are only bets on the performance of those mortgages. The MBS is still there, intact, and it owns those mortgages. The owner of a CDO cannot assume the property of a foreclosure represented within one of its tranches, because the CDO is only a bet on whether that mortgage would perform and reach maturity.

    MBS and CDO’s are distinctly different, and I believe many people are not realizing that yet.

    $ 13 Trillion MBS. $ 600 Trillion Derivatives. Getting a clue yet?

    It is why Bear Stearns two hedge funds blew up in June of 2007. They held only CDO’s of 2005 and 2006 originations. Those CDO’s could not assume the properties, thus getting some value in reselling. The CDO’s were only bets on the performance of those debts.

    The way I understand your description is the CDO’s can take over foreclosed properties. They can’t. Already been proven in court in Cleveland, when the owners of over $ 1 billion on CDO’s tried to get the foreclosed properties represented in the issues they bought. The judge, once it was explained to him what the CDO’s were, laughed and tossed their case out. The attorneys could not produce any documents to show the owners of the CDO’s held the notes to those properties, because they don’t. The holders of the underlying MBS to those CDO’s hold the notes, and they aren’t giving them to the buyers of CDO’s.

    Now, I am not saying Chase is going bankrupt or will be taken over, exactly the opposite is true. Chase will be one of the big boys gobbling up damaged banks and other damaged assets. But, it is not due to their being healthy, it is due to the fact they are the largest shareholder of Treasuries held by the Federal Reserve. The Fed, if the worst case should happen with our economy, will be forced to draw a line in the sand. The entities on the correct line in the sand, determined by their ownership of treasuries held by the Fed ,will be protected at all costs.. Those not on the correct side of the line in the sand are a target to be taken over as they get hammered by writedowns.

    Right now, it is a good guess that only three entities are on that correct side of the line in the sand. Chase, BofA and Citi. Citi will have more money from the middle east pumped into it. I do not like that two people from the Middle East now own 10% of Citi. Get ready, they are going to own at least 20% by the end of this mess. The Fed will use every resource to protect Chase and BofA. Why, because they will use the Treasuries that Chase and BofA own to protect them.

    Almost all Derivatives built on MBS will return at best, 50 -60%, and only a small fraction will do that. Derivatives that include other debt such as credit cards and auto loans, forget about it. There will be some value, but it will be somewhere between 10 -25% by the time they can be liquidated. The Fed is allowing banks to now securitize auto loans, credit card debt and other junk, and exchange it with the Fed for US treasuries, which the bank can then go borrow against. The Fed, before the swaps, had around $800 Billion in US Treasuries. More than $240 Billion in the last 6 months has been swapped.

    It is the exact amount that futures trading on commodities has gone up since January. So, when people scream about speculators driving up oil, it is the banks that are most in trouble that are the speculators. How do you like those cookies? Creating another bubble. What happens if oil retreats back to $110? Massive losses. Of borrowed money. Of borrowed money guaranteed by US Treasuries swapped with the Fed for dubious debt that might get 50 cents on the dollar.

    Any losses of those treasuries will be replaced not by Chase or BofA or any other bank party to the swap, but with taxpayer money.

    As for my prediction on what will happen - nobody has a crystal ball, but the losses are already there and being hidden in level 3. Everyday that property values decline, those losses increase. There is a good case for an L shaped recession such as Japan has experienced over the last decade. Problem with comparing it with our current circumstances is that our overall losses are a few thousand times greater.

    A depression, maybe, if the Fed doesn’t stop with the swaps it is almost guaranteed. That is what you are calling the “shift of wealth”. For some reason you don’t think it can happen with a depression. Sorry, it can only happen with a depression. It is probably the proof we are already in deep sh##. But, only with time can we look back and be certain.

    My hope is it is only a deep recession. I hope we pull some manufacturing back to this country, and stop focusing on stock value as the only measurement. That has been the problem for us over the past 40 years. Energy companies have written government policy, insurers have written government policy, investment banks have written government policy. The public has allowed the elimination of good paying jobs in exchange for cheaper goods. The reason for the asset bubbles is in this very fact. We have reached the end run of exchanging jobs for goods. There aren’t enough good paying jobs to exchange anymore. This has left us with the real economy of wages going down, and the costs of goods going up.

    Eliminate the Fed, establish a flat tax, with no deductions, and allow the big money to truly find a way to help create jobs by focusing on solving the myriad of problems the world faces today. That is how we get out of the mess.

    Look at Moe. That is exactly what he has done. I would say, judging by what I see, he has succeeded, and has probably spawned others to new ideas.

    There are silver linings, and ways to make money, as long as you don’t base your conclusions on false premises.

    Posted on June 14th, 2008 at 2:21 pm

17. Lookinthemirror Said,

    A couple of questions for the “Rick’s” that are commenting on these posts:

    1) Are you the same person?
    2) If not, please have an open dialogue with one another so we can clarify your diatribes.
    3) As I understand it, one “Rick” worked for Countrywide???

    Please clarify.

    P.S. “One” of the Rick’s uses Moe as a shining example of what is right in the world, if you are that Rick, please call yourself Rick #1. If you are the “other” Rick, please refer to yourself as Rick #2. That will make it much easier when responding to your posts. Thanks!

    Posted on June 15th, 2008 at 9:44 am

18. Lookinthemirror Said,

    To all who are reading thesse posts:

    1. Consumers are in a world of hurt due to taking on way too much debt (for whatever reason)

    2. Asset bubbles will always occur to some extent in a capitalistic society.

    3. If we are going to hold on to our capitalistic ideals, we will have to have a major systemic shift, because it is now broken for several reasons.

    4. Forget about the alphabet soup: 1 + 1 equals 2, PERIOD. All of the rhetoric is just that. Currently, in our society 1 +1 equals -100……which means we are in deep trouble. There is absolutely “no demand” because consumer’s have spent up all of their wealth and the U.S. is now a debtor society. This has been occuring for a LONG TIME. Now, the chickens have come home to roost.

    As far as exit strategies are concerned, here are the options as I see it:

    a) The FED must continue to print money, and HOPE we can inflate our way out of this recession/depression.

    b) The government must take drastic steps with regard to trade, price controls, and any other means to try and keep companies from sending job’s offshore.

    c) The government must have a “hands-off” policy in order to allow the basic laws of supply and demand to occur (i.e. allow the institutions that made poor financial decisions to fail). They should only backstop firms or set up “shot-gun” weddings in situations that would damage the entire financial system (i.e. the Bear Stearns/JP Morgan situation).

    d) American’s need to change their spending patterns NOW.

    e) Unfortunately, in the short term, we will need to rely even more heavily on Foreign Investment Funds to save our tail (just like Europe did after WWII with the Marshall Plan).

    f) Creative destruction will eventually right-side our nation, albeit there will be much more pain to come in the interim.

    Posted on June 15th, 2008 at 9:59 am

19. alan Said,

    LITM,

    You are wrong on the point that you can stop off shoring. This is a market force we are talking about. You can slow down or do something along these lines but the simple fact is there are 3bln more people that were previously shut off (you know all these dictatorships and closed regimes that have opened up in last 20 years and adopted market based economies) are competing for the same limited resources and whether you like it or not Average Joe WILL NOT come ahead unless he works hard and constantly improves, the days of high school drop out being able to afford a house and a car are gone. It astonishes me that boat load of folks are not aware that competition in the market will only become more intense. I also laugh at the notion that somehow regulation will shield Average Joe from fierce competition of the global markets.

    Witness rise of the commodities, those 2bln Asian folks have insatiable appetite for them and that means less will be going to US folks. That’s just simple math. US will go from consuming 30% of world resources to 10-15% in about two decades. It’s still pretty good given that US is only 5% of world population but it is certainly not as good as it has been.

    Adapt or perish.

    P.S. BTW, those who like to state “survival of the fittest”, got it wrong, it’s “adapt or perish”, fitness has little correlation with being adaptable.

    Posted on June 15th, 2008 at 9:45 pm

20. Rick Said,

    iliketolookatmyselfinthemirror states:

    “b) The government must take drastic steps with regard to trade, price controls, and any other means to try and keep companies from sending job’s offshore.”

    Then iliketolookatmyselfinthemirror states:

    c) The government must have a “hands-off” policy in order to allow the basic laws of supply and demand to occur (i.e. allow the institutions that made poor financial decisions to fail). They should only backstop firms or set up “shot-gun” weddings in situations that would damage the entire financial system (i.e. the Bear Stearns/JP Morgan situation).

    Ok, which way are you saying? The government should do something to control business as in b), or they should not do something, as in c)

    If you are confused as to what the Fed is, I can tell you this; The Fed is not the government. Never has been. It is the banks. President Bush cannot tell Bernanke what to do, but Jamie Dimon can.

    Anyone who says forget the alphabet soup is blind. It is the swapping of good US Treasuries for damaged debt securities that is the greatest peril to our economic system right now! It demonstrates the lack of depth you hold about how the economy works.

    The Fed’s only function is to create asset bubbles. It has no other function. History has shown us that, over and over.

    Best thing that can happen is to abolish the Fed.

    You are as wrong as you can be if you think printing more money will help. Printing more money will only dilute the value of our currency, and the dollar will continue to decline versus other currencies, especially those that are not printing extra money.

    Printing extra money is what Weimar Germany did after WW1. Within several months of that program beginning, the price of a loaf of bread went from 1 mark to 5 million marks. That is right, people were using wheelbarrows to carry enough money to buy a loaf of bread.

    You believe selling US assets to foreign individuals and wealth funds is a smart thing to do? I guess allowing the bin laden family to own a major bank is your idea of ‘responsible’ money management. At what point will they let us have our businesses back? Or is that your idea, one world government?

    Your ‘exit’ strategies are a design to ruin this country in only a few years. To compare the Marshall Plan and how money from a Soveriegn Wealth Fund would work is idiocy. The Marshall Plan was established to create economies that would pay us back for expenses we incurred defending those countries. A soveriegn Wealth Fund would never relinquish at any point in the future its ownership of any asset in the US.

    Alan is correct, the only outcome of our trade policies over the last 40 years is to create competitors for ever diminishing natural resources. Your solution is to create more competitors.

    The only solution is to abolish the Fed. If we don’t, the banks will only get larger and gain more control of our economy.

    We must bring back the manufacturing base that made this country great and reclaim those jobs we have given to other countries.

    And, we must not let any foriegn money into our society unless they can prove they provide the same rights to their citizens that we do.

    It is high time for this country to live by the words it so freely gives as advice to others.

    Posted on June 15th, 2008 at 11:47 pm

21. alan Said,

    Rick,

    The only way you are bringing manufacturing base for toys, furniture, textiles and other capital light and labor intensive industries is by making US labor cheaper than competition. That is the reality. Anything else is just populist grand standing. I know that the next argument would be isolationist self reliability similar to chuchhe principles of North Korea or self sufficiency proclamations of Soviet Union, wanna read up on it ? It’s pretty similar to all these populist sound bites.

    The only way labor costs are going down is the people’s recurring costs to maintain their lives go down, that means higher density population clusters, public transportation, smaller square footage dwellings, etc. If person A lives in 2500 sq ft house and person B lives in 1200 sq ft high rise and if person A consumes 5 times more resources to maintain his standard of living than person B, no amount of regulation will keep that economic levee intact, sooner or later market will flow around bureaucratic barriers. If anyone wants to compete with developing world they should be ready to live like them then.

    The only industries US can compete in is capital & knowledge intensive industries with highly qualified and educated labor force, like airplane engines or super heavy coal mining equipment and so on. Once again: golden age of high school drop outs is over.

    Posted on June 16th, 2008 at 8:43 am

22. Lookinthemirror Said,

    Rick-

    Thanks for enlightening me regarding basic economics. I appreciate your diatribe. Unfortunately, you are not offerring any solutions. This country has its back against the wall, with VERY limited options if any. The FED HAS to keep printing money at this point to save the financial institutions. This is a terrible situation, and, yes, I know what happened to Germany prior to WWII….this is a bit different. We are not yet at the inflation rate that they were at that period.

    Since you never responded coherently to my questions in one of my previous posts (how we arrived in this predicament), I ask you to give me an exit strategy that is realistic based on today’s situation. Abolishing the FED may be a noble idea, however, it is not a realistic one. Let’s discuss solutions that are current options for the situation at hand. Saying we should “abolish the FED” is kind of like waving a magic wand and having all the foreclosures disappear…..not going to happen!

    This is a very complicated situation, and because I stated that the government needs to be “hands off” in one area, and “hands on” in another does not mean I am contradicting myself.

    Again, another option would be to implement a Value Added Tax, or another possibility would be for a “one-time” tax hit for people that earn over a certain amount in adjusted gross income. The caveat would be that the tax revenue would be used ONLY to reduce the Federal Budget Deficit (have you looked at it recently??). That may serve to reduce the Deficit, and shore up the dollar. We need a strong dollar for several reasons. You now sound like an academic, and want to “change the world” with pie in the sky ideas like abolishing the FED. That is not going to happen in our lifetime, so don’t waste time floating the idea. We need to find some “real world” solutions.

    By the way, did you, or did you not work at Countrywide??? Are you the only “Rick” that is posting??? You never responded, so I will assume you are the only “Rick”.

    P.S. I like the fact that you are calling me “I Like to Look at myself in the Mirror”…..it just shows that I have some ideas that you may disagree with, however, I am trying to come up with real worl solutions, not academic theory……

    Posted on June 16th, 2008 at 9:37 am

23. Lookinthemirror Said,

    Rick-

    Also, I understand counter-party risk, and the TRILLIONS of dollars that are at stake. The question is how to deal with it???? You take a lot of time going through the “exact” numbers. Most people that understand this situation realize that the numbers are astronomical. The more important question is what to do after the horses have been let out of the barn. I have yet to hear you come up with any real world solutions??? Please enlighten me??? And yes, 1 +1 must equal 2. No matter what excuses come from people/corporations and government. I will put my own money into “shorts”, and reap a profit. It is a sad commentary on our country when the only way to make money is to bet against it!!!!

    Posted on June 16th, 2008 at 9:42 am

24. Lookinthemirror Said,

    Rick-

    I apologize for not putting this all into one post, however, I noticed you mentioned that the big banks will rule our economy. The big banks ALREADY rule the economy, and IF they fail, there will be a MUCH bigger problem than the one that currently exists. The FED must keep printing money in the short term to give the banks a chance to shore up their balance sheets. During this time, most of the Investment Banks will fail or be merged, as will many smaller banks. That is what needs to happen. The system must be cleansed. Look at the Dot Com world, similar in some ways, different in others. The reality is that creative destruction will be the only way to keep this train from completely derailing. You may want to look up “creative destruction”. It takes place much quicker when it is not the “banking” system, since it is not tax payer money that is in play. This is why the FED and the government need to take very careful, and slow steps to try to right-side the titanic. It is a very precarious position we are in, with not very many options. As far as the printing money issue is concerned, this has been explained to me in detail by a very respected economist who serves on the board of CitiBank. He is not an employee of the bank, just someone who has knowledge and real world experience……like to hear some of YOUR solutions that are realistic!

    Posted on June 16th, 2008 at 9:54 am

25. Rick Said,

    iliketolookatmyselfinthemirror, the more you write, the more you explain how little you understand of what is going on.

    Printing more dollars, no matter what lunacy you proffer forth, will only dilute the real value of our currency, and drive prices higher in every sector of the economy. We will pay more for imports, we will pay more for goods and services, and we will get less for exports.

    You argue we need a strong dollar. The best way to weaken the dollar is print more dollars, which is your solution. I just don’t know how to respond to someone that says “I want to enjoy this day” then pours gasoline on themself and lights a cigarette.
    Printing more money is exactly that, you will add fuel to the fire.

    The problem has been for the last 40 years our corporations have exported good paying jobs for cheaper imports which have fueled corporate profits. The answer is to reverse this behavior.

    Bring back manufacturing jobs that deliver a liveable wage, thus increasing the amount of consumers with disposable income that will spend it in the economy for goods and services. Those new manufacturers will also go into the economy for more goods and services to increase the rising demand of the workers they employ, in turn creating more jobs. Simple.

    The men in control of Wall Street will not get as large a paycheck if what I offer should happen. The only reason they can get away with it now is the Fed. The Fed needs to be abolished, or there is no chance things can get better.

    It will also help dramatically to revamp the tax code to a flat tax. It is the ONLY fair way to do it. No deductions, so at the beginning of each year, everyone can figure exactly what they will need to do if they want to improve their lot in life. Deductions only allow the fat cats to get away with paying less taxes than they should because they have the resource to hire accountants to determine where the loopholes are. Most of us do not have those resources, so most of us pay a larger percentage of our income to taxes than the wealthy.

    At the same time, because no solution can happen overnight, is we must deal with the ‘debt society’ Wall Street has created. Since our whole economy over the last 7 years, ie the Housing Bubble, was trading houses with one another, we must keep as much of that debt in place as we can. That can only happen if the people in these houses receieve a payment they can actually afford.

    You argue the borrower should be forced to pay for the full amount they agreed to. If these were normal times, I would agree with you. They are not normal, and it is critical to keeping us from a depression to keep as much of that debt in place until we begin to change the economy as I have described. The only outcome, if we follow your ideas, is most of those people will walk away from that. In your ’solution’ it would actually be better for them to declare bankruptcy and undergo foreclosure, thus walk away from the debt and leave the bondholders with almost nothing. That will cause a crash of the markets right now!

    Your “explanations in detail” of what to do are suicide for the economy. You have ignored responses from many people, not just me, offering solutiuons to the problems. most of them have been logical. You just simply come back and offer ideas that are old, tired and have already been proven to fail.

    Posted on June 16th, 2008 at 11:10 am

26. Carrie Said,

    Rick, once again BRAVO !!!!

    Posted on June 16th, 2008 at 12:01 pm

27. Lookinthemirror Said,

    Rick-

    Please answer the following questions:

    1) Is it REALISTIC in our lifetime that the FED will be abolished?

    2) If a Flat tax is implemented do you agree that home prices will fall MUCH further (take a look a the ONE deduction that promotes home ownership)?

    3) Do you really think manufacturing jobs can be brought back to the USA when we are competing in a world where the costs of doing business are MUCH cheaper overseas?

    I realize that printing money is inflationary, however, at this juncture, it is one of the only ways to preserve our banking system. We need to save the system FIRST, let the weak banks/investment banks fail/merge, and THEN we can move forward with other alternatives. The financial industry is at the core of our economy. If that system fails, all others will follow suit. If there is no way for companies to obtain capital to grow their business, than they will fail….PERIOD. Please do your best to come up with another alternative. Manufacturing is not going to magically reappear in the US. It is too late for that…..we have become a service economy, and that will not change unless our cost of labor is equal to or lower than other nations (which is not going to happen in our lifetime). I agree that the banks need to work with the borrower’s that are in default as it is their interest as well. That does not excuse the lunacy of people accepting loan terms that THEY COULD NOT AFFORD.

    Wake up, and look at the realities we face TODAY, and try to come up with a commen sense view instead of offerring text book ideas that won’t work based on what is currently transpiring in our economy. I like to read theoretical ideas as well, however, I think it is more important to focus on what might be a realistic solution. Abolishing the FED is not going to happen, and manufacturing is not going to come back home on a large-scale basis in our lifetime……

    Posted on June 16th, 2008 at 1:33 pm

28. Lookinthemirror Said,

    Carrie-

    Are you and Rick married?? Please take a moment and comment about the posts….anyone can go “You rock”, etc….please try and add to the discussion if that is possible.

    Rick- stay on track here…..don’t deviate from the realities we face TODAY! You also have never responded to my earlier post, accept by using a Nazi analogy??? Would love to hear your responses to my earlier questions and your answers. I noticed that you choosed to ignore them, since they didn’t fit your world view??? Please feel free to ask me any specific questions about the economy, and I will be happy to give you straightforward answers.

    Posted on June 16th, 2008 at 1:41 pm

29. Lookinthemirror Said,

    Pleae note: typo “except” and “chose” were the correct words…:)

    Posted on June 16th, 2008 at 1:42 pm

30. alan Said,

    Men of Wall St were making quite a money pre FED, does anyone know who JP Morgan was ? How about Rockefellers ? Carnegie ? Mellon ? The interesting thing is the distribution of income pre-FED was even more lopsided than today. So before coming up with hypothesis that fractional reserve central banking is the cause of transaction middle men earning lots of money those inconsistencies should be addressed. I personally call bull sh.t on the theory that abolishing Fed will somehow make for redistribution of income.

    The way to redistribute income is to raise taxes. Though instead of directly funding welfare programs I would rather see long term investments in public transportation system, investment in education and perhaps health care.

    Posted on June 16th, 2008 at 5:37 pm

31. alan Said,

    Just to illustrate further stupidity of the theory that fractional reserve banking causes poor income distribution. Lets take a look at ECB (European Central Bank) and EU CEO salaries, care to show me how the same there ? Oh, yeah, they tax quite a bit more but they still use fractional reserve banking just fine.

    Posted on June 16th, 2008 at 5:57 pm

32. Rick Said,

    iliketolookatmyselfinthemirror, is your only solution the marxist theory of burn everything to the ground and start over? That is where the roots of the “destructive capitalism” ideology come from.

    Alan, it is problematic. But I would rather we become a little more self reliant. If we continue on the course we are with trade, even considering the oncoming economic turmoil, we are giving our country away. Most notably to the Chinese. Our great-grandchildren will ask their parents why we allowed that to happen.

    Posted on June 16th, 2008 at 8:32 pm

33. alan Said,

    Rick,

    I agree that protection of national interests is required but I disagree on what needs protection. My take that we need to protect knowledge transfer/intellectual property or at very least ensure equitable compensation.

    In order to stay ahead we must continue to invest in fundamental and applied research and maintain technological edge. If we don’t you can kiss even knowledge based jobs good bye. And financial machinations of Wall St are not innovative risk transfer products or whatever self justifying crap they call it, no matter how many PhDs were involved in the slicing & dicing of numbers.

    The fact is there has been continuous under investment in human capital for few decades now and competition hasn’t been standing still.

    Posted on June 16th, 2008 at 9:06 pm

34. GATORBAIT Said,

    Rick,

    Please read my post very c a r e f u l l y and s l o w l y this time.////// it appears you need to digest my post before your replies.

    It seems you get some of my points/conclusions and completely miss the bigger concept- Here is my conclusion… ready…..
    -the current financial structure is completely unfair to the public. …It is also very much stacked against the Investment/mortgage banks, not the big guys (Jp Morgan, citi, BofA, or wells fargo), that has always been my point. I am not sure how you derived I feel the system is unfair to the big banks?? Do you disagree with my analysis/conclusion of how and who it is unfair towards??

    Anyway…I do get the game and see it for what it is and what it may always be…. simply a distribution of wealth. I blog with the intention to help bring light to the drama so that those not understanding what is happening know that it is possible to make it through this chaos and the end of the world is not yet here.

    I am unclear and puzzled by your false premise comment, what conclusions are false? You seem to agree with my conclusions and view (my actual conclusions and not your apparent mis-comprehension of my points), except for the dynamic on the collateralized instruments?? Isn’t an MBS a portfolio component of a cash version CDO? So in some cases the 2 are one in the same depending on the complexity of the CDO…no? Synthetic CDO’s have the derivative component that are the buzz word and whipping boy for losses the past year. The mixing/matching and packaging within these various versions seems to be one of the major issues with the losses from what I have been reading. The inability of the holder to adequately price these complex financial instruments.
    my point has been and always will be that the system is heavily stacked against the investment banks/mortgage bankers and especially the public…the big banks make the economic rules….period.

    I completely agree that the big banks are in bed with the FED….this was sealed when the fed was formed….(as I have mentioned and harped on in my last post, the fed exists for the sole benefit of the big banks regardless of what the propagated “public agenda” put forth)…that is why the new requirements hurt the IB’s (investment banks/mortgage bankers)… not help them in any fashion. Reducing the Fed Funds rate helps the big banks ( for clarity- I mean Citi, BofA, Wells Fargo and Jp Morgan) I had expected you understood my distinction between the “big banks” and the investment/mortgage banks since you have gobs of knowledge and are an insider. Another point I am making is that CW is basically a mortgage banker and was simply a conduit for the real players in the game. I am not saying CW is an innocent but that they are not the devil everyone wants to nail. The big banks are really the culpable ones and created a big portion of this financial chaos. It is clear the game was made for them because every-time there is a financial meltdown…guess who survives and makes out…I will give you 4 chances.

    what you call a “love fest” between me and lookinthemirror is actually the fact that we both understand and agree on the larger and more serious issue at present time…that the big guys already rule and run the landscape and that CW was just small potatoes compared to what big money was really made. All the unfortunate homeowners who got caught up in the hysteria (coerced or not) are faced with some hard decisions… I agree with fighting to keep their home. I understand some were possibly swindled and I also know some just had the concept to buy now, catch up later, took a big risk and wrote a check bigger than their account could handle. I also know not every broker & RE agent were the main cause of the meltdown by pushing borrowers into homes they could not afford. I can understand those that have the “let them get foreclosed on” attitude. I say to those folks that this swindle the big players have performed on us will cost us all in many ways…so do we pay now or let the dynamic play out slowly and pay much more later.

    There is going to be a bailout it is just a matter of when and how it is distributed…..I would rather it go to the homeowner in some form. If that means give the big banks a “cookie” to reduce and negotiate lower terms…then I believe it is the best option given the bad list of options we have to choose from.
    I am aware of the differences and any similarities between CDO, CBO, CMO, CDS, GIC, ABS, SIV, LDO, MBS, ABC’s and XYZ .. and did not equate each one to the other as the exact same instrument…. but then my point was not the instrument themselves, you have yet again dug on an issue not related to the bigger picture presented. My point of the securitized instruments was that when dealing specifically with MBS and the CDO it may be grouped within-it will not ever be worth 0….whether it defaults or not it will have some intrinsic value above 0…no? I really believe a CDO with a group of MBS in it will not be 0 due to the fact at some point, either near term or in the future, a buyer will be available to acquire the asset. Not to mention the tranches of synthetic CDO’s (swaps) typically mixed into the equation that allow for an actual value greater that the current markdown value…..the mark to market securities do not disappear they linger around and at some point will have the ability to be sold. That to me is the main issue- placing a value on a product that is constructed to be held for a finite period and then sold at a future date. As you said, the securities/derivatives are actually bets on performance…good and poor performance. Remember all the hysteria over the monolines?? This was more of an issue in my eyes…The loss of triple a status in my mind was and still is the hair trigger for most of the fear.
    A major point of my contention is the mark to market of these classes of CDO’s. Many banks and IB’s are marking down close zero…not 40-50% of value. I think you covered my contention quite well…that the asset now valued at close to 0 will actually perform better than that…even if it actually defaults. Forget about foreclosing…I am not sure I suggested the owner of a CDO would assume the property…my point is that the investor will ultimately have a return greater than 0. As you know the CDO’s are made up of many different types of securities..cash (i.e. MBS) and synthetic(i.e. CDS)…so my point again is that these will perform at some value greater than 0. And even if it drops 50% based on the current climate with few to no buyers, these synthetic tranches will ultimately return a better premium than the mark to market value today. The reason…? I believe there will eventually be buyers willing to bid even on the defaulted “junk”.

    I am still waiting for your explanation of the acronym….QSEP— I have no idea what you are referring to as I am only familiar of the term QSEP for Quant studies of economics and population.
    Regarding the big banks who created and control the game and will ultimately be the winner of the final outcome. The real question is- how do we as the public get screwed the least?

    I know that shutting down the Investment/mortgage bankers so that you have 4 major banks left to provide financing is not the solution because this will simply cut out competition and actually drive the cost to finance just about everything up for the consumer. This point is key and what most do not know is that a good portion of the legislation being knocked around does exactly the above…leaves a playing field of 4 major entities and attempts to crush any alternative.

    Now to get to your suggestions about eliminating the Fed, flat tax and so forth…good ideas but we are on this planet and I was expecting a rational suggestion of concepts that are actually a possibility at this point.

    Also your predictions going forward did not really indicate an end game either…I believe the fed needs to raise the funds rate. This will improve mortgage rates, boost the dollar and make oil drop like a rock. This along with the government buying the mortgage paper of the hardest hit homeowners (actual owner occupied assets) will stabilize housing….to me stabilizing housing is priority one and then a crescendo of positive events will be more possible.

    I am aware we are a critical mass, however I do not see the complete collapse at this point because it is clear to me the fed will not allow a financial Armageddon. I do not yet see an environment of a complete depression either…the sheer percentages of actual defaults seem to be no where near the level experienced in the great depression. I do believe and think a shift of wealth can happen during a depression…if fact that is exactly when I think it is the best opportunity for the big guys. That has been a main point of mine, that with all this turmoil we are actually watching a shift of control of the wealth back into the coffers of the big banks.

    I am not sure how clear I have to be…it seems you skim over what is opined and come to conclusions other than the actual intent. Period…..and you seem to run off on a rant or diatribe against an idea or thought that was not even really proposed. I have to admit I am puzzled by your replies and conclusions when I cite examples of my points.

    Rick please clarify what you mean:

    “Look at Moe. That is exactly what he has done. I would say, judging by what I see, he has succeeded, and has probably spawned others to new ideas.”
    Preceding from you was this: Eliminate the Fed, establish a flat tax, with no deductions, and allow the big money to truly find a way to help create jobs by focusing on solving the myriad of problems the world faces today. That is how we get out of the mess.
    I am puzzled by your connection between the two thoughts…….Talk about a love fest…

    Posted on June 17th, 2008 at 2:54 am

35. GATORBAIT Said,

    Alan,

    you are on mark with your points. I can see your angle and is a rational response to the current chaos.

    i may have said I agree with abolishing the FED but in fact I think it more practical to revamp so the boys club so that the Investment/mortgage bankers have some of the same access the banks have. A good portion of the turmoil was lack of liquidity…by the banks to the Investment/mortgage bankers.

    So you had an environment where the big fish hoarded all the food in the pond..so in this case the smaller competitors could not adapt so they did perish.

    When you dig deeper you see it was a liquidity freeze and confidence evaporation that really sparked the fire.

    I do not recall if the ECB allows IB’s to swap securities at their window…but this little distinction would have stopped some of the bleeding…and an 85 year old company would still be intact along with some of the confidence.

    i just have to ponder that if certain moves were made in Dec 07 would we be facing $140-$150 oil? It seems the most volatile arenas are viewed as a safer haven for some cash…

    It appears the Chinese are still buying up our treasuries….and stepping back into the MBS market……either they expect a rise in the dollar or a drop in oil.

    I read an interesting article that once the Olympics are over the Chinese will go back to burning coal to run their power plants. It seems they converted oil to cut down on pollution for the past year by not burning coal. It seems a good chunk of their oil consumption was to fuel the power grid.

    Anyone else run across this and have any idea of the actual numbers?

    Posted on June 17th, 2008 at 3:24 am

36. Rick Said,

    Alan, good thought process.

    The problem I see with a focus on knowledge and research based assets is this: If we still sell the results of the research, whether it be through straight knowledge based data or products (ie Monsanto corn hybrids etc), the world courts will not help us in protecting those patents to the extent needed to retain 100% control.

    The Chinese are turning out engineers at a rate far greater than we. They already have the capability of copying any of our new technology (which they are doing), and selling it (which they are doing) and the world courts seem impotent to stopping it. I feel this problem will only get worse.

    Gator brings up a great starting point to discuss what the Chinese will do after the Olympics. Yes, more than likely they will burn more coal for energy, because in the short term, until they put other energy providing sources such as nuclear power in place, coal is very inexpensive by comparison.

    The problem gets broader after that.

    I do not agree with Gator that the Chinese are buying more US Treasuries, in fact, the opposite is true. The Fed believes they are selling US denominated paper assets at a great rate. Foreign sales of US Treasuries have fallen to less than 10% from almost 50% a year ago. The reason Treasuries are still selling is our own market, in a flight to safety mentality. Big money, even though they realize the government numbers are a lie and inlation, in real terms, is probably northwards of 6-7%, are buying the Treasuries because it is better to lose only 3% vs. 25% should the market take a dive.

    Even worse for the US concerning China is this - China bought over $1 Trillion in MBS and other derivatives based in 2005 and 2006 originations of mortgages in the US. They have not sold these, because there is no market. The losses on these derivatives are already massive, and are only getting worse as property values decline. How pissed do you think they are about this? I have been having discussions with people that believe, just as Gator inferred about the coal, that the Chinese are putting on a happy face until after the Olympics. What they will do is anybody’s guess, but help the US protect intellectual patents probably isn’t in the cards.

    Pretty soon it will be apparent that we are not selling enough Treasuries to pay the interest on what has already been issued, and the rate will skyrocket. 8%, 9%, 10% or more rates on the 10 year notes will be reality. If the Fed does not stop the crap with the swaps, we will get 15% or more as rates on the 10 year notes.

    What’s coming may be very bad for the US. Many countries invested in these Derivatives, and the really big losses on them is still in front of us. The turmoil with the banks in Europe has been over losses on derivatives. The two banks nationalized by the German government are a prime example, the losses they realized were on derivatives built on US mortgages. Consider that, at best, we are maybe only 20% into the actual tally on losses involving derivatives, and you can see this is far from over.

    If the Fed begins to print more money, as has been suggested, you can turn out the lights, it will be over. The Amero will become reality, and Canada, the US and Mexico will become one economy, and eventually one government.

    This is why I have said the only solution is to abolish the Fed. Their failing to properly regulate the actions of the banks has caused all of this to happen.

    If we don’t, the banks will only get larger and gain more control of our economy. And, pull the same malarkey over and over again.

    We must bring back the manufacturing base that made this country great and reclaim those jobs we have given to other countries.

    And, we must not let any foriegn money into our society unless they can prove they provide the same rights to their citizens that we do.

    We must swallow the medicine. If we don’t…..

    Posted on June 17th, 2008 at 7:59 am

37. Rick Said,

    Gator,

    If the Fed and FASB had enforced proper aocounting procedures starting in January 2007, the losses would have been only 5-10% of what they will be. You are right about thinking of what might have been. It is not a waste of time to look back, because understanding what happened can give you answers towards solving future problems.

    Posted on June 17th, 2008 at 8:17 am

38. Kevin Lamson Said,

    So can anyone guess the name of “organization” that was formed by Countrywide’s, Anthony Mazillo and Fannie Mae’s, James Johnson ten years ago it start with an M? No not the Mafia. It Mortgage Electronic Registration Systems Inc. commonly reffered to as MERS. Yes thats right Countrywide and Fannie Mae were the lead organizers of MERS and are shareholders and “members” of MERS. Here are excerps from an investigative report on MERS I have been working on for the last several months. This may help shed some much needed light on MERS and the cozy relationships many of its so-called ‘memmbers” have between each other and with our congress. It may also explain why no one in congress has bothered to investigate MERS and it crazy “paperless” system that these greedy mortgage executives invented so they could line their pockets by originating and flipping phoney mortgage loans into so-called mortgage backed security trusts and then selling trillions of dollars of bonds to investors around the world. By reporting false profits from these sales Fannie Mae’s and Countrywides executives were able to make hundreds of millions of dollars in “bonuses”.

    THE MERS FIFTY MILLION MORTGAGE MELTDOWN.
    By Kevin J. Lamson. May 15, 2008.

    PART I. The Promissory Note Evidence Ownership of Debt and Standing to Bring Suit.

    · The Fundamentals:
    In the period beginning in 1999 and ending in March of 2008, Mortgage Electronic Registration Systems Inc., a/k/a/ MERS, has been named as a “mortgagee” on over fifty million mortgages. Yet MERS has never orginated a single mortgage loan nor loaned a dime to a single borrower. In 2001 the New York Surpreme Court ordered the Sufulk County Clerk to accept MERS mortgages for recording as a purely ministerial duty. However the Court denied MERS request for a judgment declaring that MERS mortgages were “lawful in all respects”. The New York Court of Appeals affirmed the Supreme Court’s order directing the County Clerk to record MERS mortgages. The Court of Appeals did not reverse the Supreme Court’s denial of MERS request for a judicical declaration that MERS mortgages are “lawful in all respects”. MERS, for obvious reasons, did not want a published opinion the fact that MERS mortgages are legal nullities and/or that MERS has no standing to enforce a mortgage when it is not a creditor entitled to collect a debt. The New York Court of Appeals did address and frame these two issue but left them to be decided at a future date.

    · No Note No Foreclosure
    In reality MERS is really nothing more than a shell, or a front corporation for its so-called “members”. Many of these MERS members were once some of the most prestigious names in American finance. Many MERS members are now reporting hundreds of billions of dollars of losses as result of their illconcieved scheme to ramp up mortage orgination so they could pretend to flip millions of mortgage loans into trusts in exchange for trillions of dollars of investors money. One big problem was that the promissory notes were never actually deleivered to the trustees of these trusts. Therefore these trusts have no evidence of ownership of the debts they puportedly purchased. Akin to purchsing a home without being given a deed. To make matters worse many of the debts evidenced by these undelivered promisssory notes were supposed to be secured by mortgage liens. However in place of mortgages being executed in favor of the original lender many of these mortgages were executed in favor of MERS. Because MERS never holds these notes or owns a debt it is not a creditor. MERS has no legal standing to enforce a debt, or so it told the Nebraska Court of Appeals in 2005. However this lack of standing defense must be raised by property owners who are sued. The most effective economic way to raise this lack of standing defense is by bringing a motion to dismiss in response to the complaint to foreclose. In many states and in federal court this is called a Rule 12 motion. This motion is brought in place of answering the complaint. An honest attorney in most areas of the country should be willing to prepare and bring such a motion for $500.00 to $1,500.00 for a distressed homeowner. Or you might be able to find a lawyer to do it for you pro bono and perhaps a legal aid attorney. At least five judges around the country have dismissed these actions for lack of standing sua sponte, which means they did it on their own volititia. Perhaps more judges will feel the duty to do the same thing in the future. To protect the integrity of the Court.
    MERS members, mortgage industry executives, invented the so-called MERS paperless system to short cut standing mortgage lending safe guards and circumvent the legal requirements for originating mortgage loans and/or for selling and transferring these loans to subsequent holders. This would allow MERS members like Countrywide Financial, Fieldstone Mortgage, and Option One Mortgage to make loans to anyone with a heart beat and then quickly flip these questionable loans to other MERS members such a Fannie Mae, Freddie Mac, Bear Stearns, Merrill Lynch, Lehman Brothers to name just a few. (”Secondary Mortgage Market Players’)

    These Secondary Mortgage Market Players would claim to package millions of these loans, with or without being delivered the promissory notes, into loan pools or “mortgage backed security trusts” and then flip the loans by selling trillions of dollars of bonds to investors around the world. The bonds were touted by Secondary Mortgage Market Players as producing safe yet high returns. The investors who bought these bonds included many of the worlds largest national banks. Initially MERS members reported windfall profits year after year by quickly originating, packaging into pools and then flipping trillions of dollars of mortgages loans to investors. Other MERS members, such as title insurance companies, also took their cut from each of the fifty million loans that were made while this high speed gravy train was rolling. MERS itself would earn over a billion dollars a year by charging its members $250.00 for each mortgage that MERS would be named as “mortgagee”.

    A June10, 2007 article in Forbes magazine details the carelessness in the securitization process by which mortgage loans were packaged and sold off to mortgage pools is now coming back to bite the trustees of these mortgage backed trusts who are now seeking to foreclose millions of loans that are in default:

    · The financial engineering (ie. mortgage securitization) helped oil the housing boom by making credit more available. But stalled housing prices and rising defaults have revealed a mess: In the rush to flip paper, lots of the new lenders or pools don’t have the proper paperwork to show they even hold the mortgage.

    The r