Wreckonomics

Are we having fun yet?

2011-03-02T22:18:00.000-05:00

As the tension in the Middle East reaches the boiling point and our collective intelligence plays "watch the birdie" with collective bargaining and the budget issues here at home, don't you just want to hop on over to the nearest amusement park and vomit off the top of the tallest coaster?

A replay of 2008 is here. Peak oil, banking issues, market at highs, budget woes, jobless issues and criminals running the prison.

Nice. Get ready. The Arab Nations are the catlyst. Europe is the fuel. We WILL light the fire. Please keep your hands in the coaster at all times.

Egypt

2011-02-10T13:22:00.000-05:00

These days anyone can pass themselves off as an expert in geopolitical events. Has the world become this predictable? Why yes... yes it has. I'm going to throw my hat in the ring here with the disclaimer that the only educational credential I have on commenting on this issue is that I'm a member of the human race and have watched the news for 30 years.

That being said... Mubarek is regarded as a "friend" to the United States. So was the Shah of Iran. What they both have in common is that they were dictators. Hands down. There was and never has been a democratic government in the Middle East as far as I'm concerned, and there will most likely never be. Hell, there's really not a democratic government here is the U.S., either... that's another debate for another day.

As I listen to a commentator on FOX News call this the beginning of "big changes" in the Middle East I cannot help myself but to think "REALLY??? - The real question is when will it STOP changing?" There is only one concern the Western World has with Egypt... OIL. We all know it. Sure, Egypt will become a net importer of oil soon, but the Suez Canal is the key.

The United States' concerns about who comes to power boils down to one thing... will they play nice with us or will they not? That's it. That's all. Oh... and the chances of that happening are pretty damn good considering half of our military lives in Iraq now.

As far as a power vacuum? There will never be one as long as we are there. Agree or disagree... I don't care. As long as we are there, militant factions will resist us, creating the illusion that we MUST stay. Oh, what a wicked web we weave...

Obama and the Chamber of Commerce

2011-02-07T22:28:00.002-05:00

Ok, I try not to pay much attention to what the latest Presidential offering in the form of a speech does... and lately (meaning like... oh the last 4 Presidents) they all sound the same anyway...

"Blah blah blah... what you can do for America... blah blah blah...." and that's EXACTLY what Obama's latest speechifying sounded like today before the Chamber of Commerce. I am so sick and tired of the "BLAH BLAH AMERICA BLAH BLAH ALL AMERICANS BLAH BLAH BLAH" bull shit from these poor excuses for corrupt politicians (pay attention... I really do mean what I just said)... I could just, well... swallow a paperclip. That sounds highly entertaining.

When are we going to get our arses off the couch and vote for a REAL American? This guy is like all the rest. Republican, Democrat, "Independant" (which really means... "I'm both")... all the same.

Thoughts for a Saturday

2011-02-05T11:58:00.001-05:00

Yesterday we witnessed spin. I know, I know... when don't we?? Really... creating 36,000 jobs is a BIG WIN?? The small number was weather related? Did anyone watch Jim Cramer last night? I mean sure... he's got a lot more $ than most of us so he's got to be right about something, right? Right? Hell, his cheerleading is just getting old now. How do you spin that BLS crap?

10 years ago a number like that would've pushed bond yields down all day long and stocks would've been pounded. Now, due to the Fed's distortions and our Government's willingness to participate in this fraud we get a "Now that ain't so bad" attitude.

Come on. Isn't this getting old, now?

Here's a fantastic perspective on the BLS and their Black Magic Box.

Global Unrest will be the Theme for 2011

2011-02-04T10:48:00.000-05:00

Tunisia, Egypt, Yeman, Jordan, Syria... oh yeah, Iran, Iraq, Pakistan. I wouldn't leave out Afghanistan, either. Bernanke's speech yesterday was full of distortions and platitudes to his own policies. We are exporting inflation, and it will not go lost on the Middle East. We turned on the printing press to cover the fraud which was our banking system. We are marching down a road often travelled, by failing governments. NO... I'm not predicting our government will fail... this year or next. However... get ready for the pain.

Democracy is a great idea. Greed is a bigger temptation. In the end... greed gets it all.

That's the way it's been... forever. That's the way it will be... forever.

The Return

2010-08-06T14:38:00.000-04:00

Well...

It's been a while. Lots of stuff has happened. Lots of stuff hasn't. Is that consistancy for you? Yep. Sure a hell is. While I've been taking some time to gather my thoughts, consolidate my feelings and prepare for armageddon... America has done... well... what?? Our government has certainly screwed the pooch... yeah, yeah... the Dow is over 10,000. I get it. But are YOU any richer? Is the world any better off? Is America "recovering" yet?

I think the answer to this is... well... you know. We are watching YOU, big brother. Look out.

Think this is over? Not by a long shot.

2009-07-02T23:52:00.004-04:00

It should be obvious to most now that the "green shoots"... and yes... that phrase is as exciting to me as... oh... painting a barn white... um... the "green shoots" are just a figment of the stimulus-loving media... CNBC .

Now I could go on and on quoting this "secondary indicator" and that "turning point" and this "still negative but not AS negative" garbage... or I could cut to the chase. Show of hands anyone??

I thought so. So let's sift through all the B.S. with one simple article...

United Western Bancorp, Inc. Reports Sale of Mortgaged-Backed Securities

Something this simple escapes the "brilliant" minds in Washington and Central Bankers' offices world-wide. I encourage you to read it, but basically it's a standard "this bank sold these securities for this amount" but what is astounding and absolutely frightening is the devil in the details:

"United Western Bancorp, Inc. (NASDAQ: UWBK - News) (the “Company”), a Denver-based holding company whose principal subsidiary, United Western Bank® (the “Bank”), is a community bank focused on expansion across Colorado’s Front Range market and selected mountain communities, today announced that the Bank sold mortgage-backed securities with an unpaid principal balance of $47.3 million of lower tranche mortgage backed securities secured primarily by “option-adjustable-rate” mortgage loans (the “Option ARM Securities”) to an unaffiliated third party. Total consideration received for the Option ARM Securities was $378,000. "

Hmmm... so let's see... This bank found an interested third party to buy $47,300,000 worth of Option ARM mortgages for.... drum roll please... $378,000. Yep... that's .08% of their face value.

What??? Reeeeallly??? Now... a quick recap of Chapter 1 on "How to Value a Pile of Crap"...

If you have a big pile of crap on your front lawn and you put a sign out that says:

CRAP FOR SALE - $100 or best offer

and after about 2 years someone offers you ONE PENNY for it.... what was it worth?

Now... let's think about this... this small unknown bank was able to find a buyer that would take their 47 MILLION dollars worth of crap for oh... a 99% haircut.

What was their crap really worth?

Now let's think about Bank of America, who has HUNDREDS OF BILLIONS OF DOLLARS of this same CRAP (Option ARM Mortgages) on their books thanks to the Countrywide purchase...

and...

Wells Fargo, who originated HUNDREDS OF BILLIONS OF DOLLARS of this SAME CRAP on their own before swallowing Wachovia, which origniated HUNDREDS OF BILLIONS OF DOLLARS of this SAME CRAP on THEIR own before SWALLOWING Golden West/World Savings, which proudly boasted for years that they ORIGINATED THE IDEA OF THIS CRAP as well as ORIGINATING HUNDREDS OF BILLIONS OF DOLLARS of this SAME CRAP

and....

IndyMac Bank, which LOVED THIS CRAP and then failed... and Washington Mutual, which LOVED THIS CRAP and then failed...

and....

well... HOLY CRAP.

I'd say the market just told us that Wells, BofA and anyone else with this CRAP on their books is pretty likely to take a 99% haircut.

Let's not forget that Option Arm Mortgage defaults are also rising at an exponential rate as foreclosures filed in the latest quarters set... oh... another record. It's getting better out their, isn't it?

And what do they say this crap is worth? Have you seen the earnings reports they cooked up? Hmmmm.... who's lying now????

WAKE UP AMERICA... OUR BANKS HAVE FAILED... OUR SYSTEM IS COMPROMISED.... IT'S TIME TO TAKE IT BACK.

Sign of the Economic Apocalypse

2009-02-10T23:41:00.004-05:00

Another sign of economic apocalypse is upon us:

CNN Money is reporting that Wal-Mart is cutting jobs from it's Bentonville, Arkansas headquarters. 800 total white-collar jobs down the drain at the world's biggest retailer. While it may seem like a drop in the bucket compared to the hundreds of thousands of jobs being shed by companies such as GM it does call for pause.

Wal-Mart... laying people off. Wal-Mart. Click your heals 3 times.... there's no place like home, there's no place like home, there's no place like home, there's no place like home...

Wag the Dog

2009-02-09T21:59:00.004-05:00

Take a look at this clip from C-Span of Rep. Paul Kanjorski (D-PA) discussing the initial $700 Billion TARP Program. At about 2:20 into the video, he reveals what the Federal Reserve and Hank Paulson told Congress on September 15, 2008. The banking system was hours away from a complete meltdown.

Gee. Thanks. Place a check in the "Things We Already Knew" column.

What is most disturbing is this... and you have to watch the entire video to pick it up... it's worth it...

The clip begins in the middle of a rant from a woman caller explaining she's paid $600 in utility bills, is out of money, and the $800 Billion "stimulus" package should put money directly in the hands of the people and we'd stimulate the economy ourselves (she actually says this)...

Kanjorski then eschews the virtues of the decisions they've made, the impending collapse of the system and why TARP changed. This takes most of the rest of the video... here's the kicker...

At the end he actually says... and I shudder at this... he actually suggests that we ask people like the caller at the beginning of the clip for their opinions because they may have better ideas. Because, as Kanjorski puts it... they are not financial geniuses and don't have all the answers. MY GOD... as if we didn't know.

People... this man is a CONGRESSIONAL CAPITAL MARKETS COMMITTEE MEMBER. Shouldn't he have a certain level of expertise? Shouldn't he have better ideas than the caller who can't pay her utility bills? Shouldn't he be able to come up with something better than "let's solicit ideas from everyday Americans because they know better than us"...??????

WAIT... oh.... maybe he's actually on to something. This is scary, folks. This is our government in action.

Think The Job Depression is Over? Think Again

2009-02-08T21:55:00.003-05:00

It's amazing what politicians can twist and how blind they can be. Take a look at the chart below. It compares job losses in the current recession (depression) to the 1990 and 2001 recessions.

Notice anything different? I'll spare the insult to your intelligence and just ask this simple question... does anyone really think a second half rebound is in the cards? Oh... and another question... does anyone really think spending another TRILLION DOLLARS of our grand children's money will do anything? Anything at all?

We, The People

2009-02-07T22:56:00.003-05:00

It's time, folks. Time to consider the fact that our government is no longer "of the people, by the people and for the people". Time to consider the fact that we are swimming in a pool of s**t created by the wealthy ruling class of America. Time to consider the fact that our new President, while well-meaning and ground breaking, is a political pawn. Time to consider that the coming Depression... yes... I said it... could have been avoided.

The Founding Fathers were well aware of the corruption of money and power. It is what they feared most for our fledgling democracy. It has come to fruition. They would act. Shouldn't we?

"The people cannot be all, and always, well informed. The part which is wrong will be discontented, in proportion to the importance of the facts they misconceive. If they remain quiet under such misconceptions, it is lethargy, the forerunner of death to the public liberty. … What country before ever existed a century and half without a rebellion? And what country can preserve its liberties if their rulers are not warned from time to time that their people preserve the spirit of resistance? Let them take arms. The remedy is to set them right as to facts, pardon and pacify them. What signify a few lives lost in a century or two? The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure."

- Thomas Jefferson

The Mess That Greenspan Made: "End the Fed" legislation reintroduced

2009-02-05T12:08:00.000-05:00

The Mess That Greenspan Made: "End the Fed" legislation reintroduced

Reality Has Become The Perception

2008-10-10T14:51:00.005-04:00

In this scene from "Wall Street" Gordon Gekko reminds us that most of what we see in he financial world is an illusion. The perception has become reality. "I create nothing; I OWN."

I believe what we are witnessing in this historic time is that reality eventually wins. The problem, however, is that when reality IS the perception, the let-down is even greater than the original ruse. Why? Because we watch those that created the "reality" crumble under the perception that they have failed.

Calls for the bottom are overly optimistic. The reality here is that... sometimes, Reality Bites.

An Email to Friends

2008-10-05T23:09:00.001-04:00

Hey guys... I know, I know... another "doomsday" scenario from Chris, ever the pessismist... but I ask both of you, who know me so well... to ask yourselves a serious question... "Was Klein always such a pessismist?"

I think you know the answer to that. I'm not. I'm actually an optimist and an opportunity-taker... if you will.
We are on the precipice of the greatest financial catastrophe in modern history, and I think you are both beginning to realize that. As my father says... this is the time to find your opportunity and make the most of it. The more informed and realistic you are, the better off you will be.

Please read the following.... and take it to heart. I care about both of you very much and I don't see any way out of this mess (given what I know and what I've learned) for a few years. The government is doing everything they can to cover up the mess and protect those who took advantage of all of us... they will fall, as they stood atop the house of cards. The real question is... "Who will rise from the ashes?"

"Despite last summer’s collapse in private-label MBS and related markets, the faltering Wall Street Bubble nonetheless persevered up until the Lehman collapse. While it was problematic that overall system Credit growth had slowed markedly, there remained key sectors of Credit and risk intermediation that remained very much in expansionary mode. In particular, GSE-related obligations, bank Credit, and money market fund assets had expanded rapidly in spite of the subprime collapse. Importantly, the speculator community had maintained easy access to cheap finance. As I have noted often, despite the unfolding bust in mortgage and risk assets, market faith in “money” and the core of the system had held steadfast. This all ended abruptly three weeks ago with the Lehman filing.

Today, confidence has been shattered, and Wall Street finance is a complete and unsalvageable bust. The spigot for Trillions of finance - that for years fueled the asset markets and U.S. Bubble economy – has been essentially shut off and dismantled. In particular, Wall Street finance was a mechanism for intermediating higher-yielding riskier loans. This finance provided rocket fuel for both residential and commercial real estate markets – and the attendant wealth effects. Wall Street finance also grew into the key source of finance for auto purchases, student loans, Credit cards, municipal finance and various business enterprises. Many of these loans were of a risk profile unappealing to traditional bank lending – and, hence, provided the type of higher yields quite appealing to the speculator community.

And, importantly, as the stature of Wall Street finance grew its impact upon the real economy became embedded deep into the Economic Structure. Or, stated differently, risky loans came to play a major role in determining spending and investment patterns throughout the “Bubble” economy. Wall Street finance became a major direct and indirect generator of household incomes and corporate profits. Moreover, Wall Street finance came to dominate the flow of finance both in and out of the securities markets. Wall Street could create its own liquidity and funnel it into the U.S. and global markets – and earn unimaginable returns in the process.

It is today impossible to comprehend the full ramifications from The Bust in Wall Street Finance. Yet we can be rather certain that for the foreseeable future much less Credit and liquidity will be directed to the asset markets. And, at the same time, there will be significantly less Credit Availability for riskier loans of all varieties – for the household, business, financial and the government sectors. Few appreciate that these dynamics are extremely problematic for the U.S. Bubble Economy – an economic system that had come to a large extent to be governed by asset-based and high-risk lending. These dynamics are at the heart of today’s Acute Financial and Economic Fragility and the resulting imploding markets.

The leveraged speculating community played such an integral role in the overall Credit Bubble and, more specifically, to the Bubble in Wall Street Finance. They were instrumental in both spurring financial sector Credit creation/leveraging, while directing this Flood of Finance to the asset markets. And the more the leverage and the greater the Flow to inflating markets, the higher the returns generated by this expanding pool of speculative finance. And the greater the returns, the more robust the “investment” flows into the hedge fund community – spurring more leverage and more potent fuel for additional self-reinforcing asset inflation. Well, this historic speculative Bubble is now in the process of blowing up. One of the greatest manias ever – surely The World's Greatest Episode of “Ponzi Finance” – is absolutely coming apart. And the wreckage is accumulating in all markets – everywhere.

Here at home, our maladjusted economic system will only be sustained by somewhere in the neighborhood of $2.0 TN of new Credit. It’s simply not going to happen. The $700bn from Washington would seem like an enormous amount of support. In reality, it’s nowhere even close to the amount necessary for systemic stabilization. To the $2.0 TN or so of new Credit required this year (and next) add perhaps as much as several Trillion more necessary to accommodate speculative de-leveraging (liquidations forced by huge losses). Importantly, the Bust in Wall Street Finance has ensured that insufficient liquidity will be forthcoming to maintain inflated asset prices and sustain the Bubble economy – creating catastrophe for the leveraged speculating community.

The “Freidmanites” thought they understood the (post-crash) policy mistakes that led to The Great Depression. They believed the “Roaring Twenties” was the “Golden Age of Capitalism.” The great bust could have been avoided with a simple ($5bn or so) banking system recapitalization. As we are witnessing today, the issue is not some manageable amount of new “capital” to replenish banking system losses. Instead, the predicament is the massive and unmanageable amount of new Credit necessary to, on the one hand, sustain a mal-adjusted Bubble Economy and, on the other, the Trillions more required to accommodate a gigantic speculative de-leveraging. I have a very difficult time seeing a way out of this terrible mess."

The above quote is from Prudent Bear

The Day America Woke Up

2008-09-29T23:02:00.004-04:00

America opened it's eyes today. Yes, there is a positive side to the rejection of the largest fleecing of the American Citizen in history. While political pundits positioned themselves on either side of the aisle after the "stunning" defeat of this bailout package what was over-looked is...

They listened. Our government heard us. Protests, faxes, emails, phone calls... no amount of begging by the likes of Hank Paulson, George Bush, Ben Bernanke, Nancy Pelosi, Barney Frank, Christopher Dodd, et. al can change that fact. All the posturing in the world cannot and will not change the fact that we, the people, rose up, shouted, screamed, kicked and wailed "PLEASE DO NOT DO THIS!"

and... Congress blinked. So... bring on Armageddon. Let the apocolypse begin. Because Lord knows, Hank, Ben, G.W. and Nancy all told us it was going to happen if they didn't get to spend our money, so it must be so.

Are our problems solved? Not in the least. Are tough times ahead? Certainly. Will they try to ram another package down our throats? Probably. Will that pass? Who knows, but it shouldn't.

A crack addict has to hit rock bottom to recover. You can't hand him a rock every now and then and expect any change. However... cold turkey, no matter the pain, results in recovery and in recovery he gains strength. Think about it.

Credit is frozen or freezing over. Credit is what got us into this mess in the first place. Cold turkey might be the best thing.

A Request for Our Leaders

2008-09-23T10:42:00.003-04:00

Please do not allow this reckless legislation and obvious bailout of Wall Street to pass. The true cost of this is much more in terms of OUR money... the PEOPLE'S money and more importantly the CITIZENRY OF THE UNITED STATES' GOOD WILL.

For years, we have listened to those on Capitol Hill eschew the virtues of reigning in reckless spending and protecting the American people. Now that Wall Street has CLEARLY violated the public's trust through unwarranted leverage, spending and greed using taxpayer money and putting the long term security of this country at risk by borrowing from our future is downright criminal.

Let the markets correct themselves. What happened to the resiliency of the American people we so proudly put forth at every political convention and whenever those seeking office seek votes?

Have we become so very dependant on debt as a Nation that to allow the ponzi scheme that created this mess to fall is a BAD thing?

I beg of you, Sir, to stop the fleecing of America. Let the people rework this. Represent US. Do not do so would be a travesty of the American Idea.

Respectfully...

The People Of the United States

PLEASE...

EMAIL THIS TO ALL OF YOUR REPRESENTATIVES ON A LOCAL, STATE, AND NATIONAL LEVEL.

THIS IS A RECKLESS QUICK FIX TO AN ISSUE THAT MUST BE ALLOWED TO WORK ITSELF OUT. THE UNINTENDED CONSEQUENCES ARE FAR WORSE WITH GOVERNMENT INTERVENTION ON THIS SORT OF SCALE. If you believe the rhetoric of "this is better than the alternative"... ask yourself... "Why is no one allowed to even PRESENT an alternative... and if they are so right and so good at what they do, why has NOTHING worked in any way, shape or form up to this point?"

Ask yourself that.

Click this link for phone and fax numbers for Senators

Now What?

2008-09-22T23:50:00.003-04:00

The following is a reprint of my post for Wreconomic's sister blog: Foreclosure Statistics

OF COURSE the government is going to bail out Wall Street... what are friends for?

OF COURSE the government is going to pork up this bailout with some sort of foreclosure bailout package for homeowners.

OF COURSE this will not work, as NOTHING has worked since day one of this crisis. Why? Because values have not become remotely affordable and lending has contracted. No amount of bailout from anywhere will cause banks to loosen their lending standards to where they once were. As a matter of fact... this will most likely spark a huge sell-off in the Treasury Market, driving interest rates into the stratosphere.

You see.... our country is well past deficit spending... we are now spending our great-grand childrens' money. How can we do that? By borrowing it now. How do we borrow it? The Treasury sells more and more bonds to generate the cash now. As more bonds are generated, the supply swells, the price falls and the yields on those bonds rise. Interest rates rise. It's simple. And they know it. In effect, we will be printing money. They will argue that we aren't... but we are. Now combine falling asset values (housing prices, car prices, goods prices, stock prices) with an increased money supply (selling treasuries like mad to generate the cash to give to banks to buy the bad assets) and a lending contraction and...

PRESTO!

Lock up. Freeze. Bust. DEPRESSION. Call it whatever you want, but it ain't gonna get any better. Just how in the HELL is this going to help anyone? Really?

When the median home price is still WELL out of reach of the median income... just how is this going to help? Actually... no one in our pathetic excuse for a government has given us any reason that this will help. All they can say is that this is necessary and preferred over the "alternative." I ask you ... Senator Havalot... what, exactly, IS the alternative? And if that unspoken alternative is the big D word... why is it ALL OF A SUDDEN THE ONLY ALTERNATIVE? Where IN GOD'S NAME WERE YOU FOR THE LAST 2 YEARS WHILE THE WORLD CAUGHT ON FIRE?

HOLY COW, PEOPLE... IT'S TIME FOR A REVOLUTION. Remove the traitors. The Founding Fathers would have.

Hank Paulson's Plan

2008-09-22T22:59:00.003-04:00

Is it just me or does it seem like something else is going on around here?

The End Game is Near

2008-09-14T23:06:00.005-04:00

Imagine yourself on a pristine beach, watching the seagulls soaring above, the dolphins feeding in the distance all the while feeling that warm, comforting breeze blowing inland. Salt spray caresses your senses and the soft sand beneath your feet comforts your soul.

Gazing seaward, you notice a small vessel on the horizon. As you focus your eyes on the boat, you notice what seems to be a small wave working it's way from the back of your view towards the hapless craft. Thinking nothing of it, you blink, only to discover that the wave has swallowed the boat and nothing is left. You curl your toes in the sand and a slightly uneasy feeling drifts over you. Your concern is mostly for the souls lost when the sea took the vessel to the bottom.

But the smell of the sea and the light breeze soon settle your soul once more. Casting your eyes once again towards the sea, you notice the wave has grown to a small bump, nearer than the horizon. "Must've been a big one... glad it's not near the shore..." you think to yourself.

Sitting down on the sand, you begin to feel comforted again by the fact that you are so far away from this event that it could not possibly affect you. As the seconds pass, you begin to realize that the shore line has extended itself about 500 yards further down the beach. Remembering something you saw on TV a few years back, you come to the realization that this isn't good. Just as you begin to think you should leave the beach, you look up and........................................

Countrywide, Indymac, Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, Wachovia, Washington Mutual, National City and over 280 mortgage companies... GONE or GOING TO BE GONE.

Who thinks this crisis is near bottom? Show of hands....

Let the games begin!

2008-09-10T15:10:00.003-04:00

The picture above is not for effect, folks. It's the face page from Fannie Mae's Prospectus. In case you have trouble seeing it, or are too lazy to look at it... allow me to help you:

"THE CERTIFICATES AND PAYMENTS OF PRINCIPAL AND INTEREST ON THE CERTIFICATES ARE NOT GUARANTEED BY THE UNITED STATES AND DO NOT CONSTITUTE A DEBT OR OBLIGATION OF THE UNITED STATES OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES OTHER THAN FANNIE MAE" oh... may I add EXCEPT FOR YOU AND YOU AND YOU AND YOU AND YOU AND YOU AND....... ALL THE TAXPAYERS.

Of course... that doesn't appear anywhere, does it?

There. Does that help? Many thanks to The Market Ticker for that one. I've been waiting for the dust to settle on this before having at it, but it suffices to say that I'm absolutely stunned that a lowly mortgage guy such as myself could have predicted this before all the phonies on TV/Wall Street and the U.S. Government. As a matter of fact... we could all see this train wreck coming, couldn't we.

This isn't over by a long shot, people. There are SERIOUS implications to the "Nationalization" of both Fannie and Freddie. Legal, economic and moral. The robber barrons have resurfaced. The fleecing of America is almost complete. Now they've got our homes by the balls.

I encourage you to travel over to The Market Ticker and review. His opinion is a pretty close to mine. More later.

American Housing's Last Rites

2008-09-05T22:31:00.005-04:00

Funny how these things happen, isn't it? Hmmm... let's see... as pontificated on February 18th, March 3rd, 4th, 22nd and 29th, today, September 5th, there are reports that the Treasury is near a plan to backstop Fannie Mae and Freddie Mac, effectively wiping out the shareholders and placing the burden of these completely insolvent institutions on the American Taxpayers' backs.

Pathetic. No... incredibly pathetic. Will common sense ever return to the American Pysche? I think not. Not until we hit rock bottom. Crack addicts hit rock bottom and either slowly rebound or die. This is where we are, America. Don't believe it? Think again. Our Government continues to feed us lies we know are not true but cling to in an effort to deny the oncoming pain.

As I said on February 18th of this year in Are Fannie and Freddie The Next to Fall:

"Fannie and Freddie have already posted MULTI-BILLION DOLLLAR LOSSES. All due to the fact that foreclosures on their books are at record levels. Now, let's add mortgages that are almost THREE TIMES THE SIZE of the median home price in the country. Mortgages that are either in default or about to go into default. Let's burden the GSE's with these toxic buyers. Oh yeah, and add on a heavy dose of depreciating assets.

What do YOU think will happen. It's clear to me, as it should be clear to everyone out there, that the government has absolutley NO idea what to do with this crisis. It's also very clear that Wall Street is not running for cover, but DIVING for it.

The thought that we are about to dump this problem on Fannie Mae and Freddie Mac should be a very sobering one."

Gee... I guess Bernanke, Paulson and company didn't see THAT one coming.

Following up on March 1st with Pulling The Plug on Fannie Mae and Freddie Mac:

"Who's passing out the crack pipe at these "meetings"? These firms are both upside down and insolvent. Their loan pipes are spiraling towards mass foreclosure on the subprime, Alt-A and prime side.

Increasing the loan limits and encouraging them to take more risk is going to help?

Not a chance, folks. This is a big set up for a taxpayer funded bailout, and yet another brilliant example of Wreckonomics....

The goal here is for these companies to take the bad mortgages off the books of the big banks (that are all teetering on the edge of failure as we speak). Once this happens, it will be much easier for the sheeple to accept a taxpayer funded government bailout.

Once again... the wicked web is weaved, and we are the flies getting the juice sucked out of us."

And, on March 4 the lunacy continued, as outlined in Big Ben and the Fed - The Setup is Here:

"The bailout, however nuts, is in the works. Bernanke goes on to say:

"The government-sponsored enterprises (GSEs), Fannie Mae (FNM) and Freddie Mac (FRE), likewise could do a great deal to address the current problems in housing and the mortgage market," Bernanke said. "New capital-raising by the GSEs, together with congressional action to strengthen the supervision of these companies, would allow Fannie and Freddie to expand significantly the number of new mortgages that they securitize."

"I urge the Congress and the GSEs to take the steps necessary to allow more potential homebuyers access to mortgage credit at reasonable terms. "

The groundwork is being laid. The fix is in, and they know it. We are going to pay for this mess, folks. Better get used to the idea."

As not to overdue the obvious, it pays also to read This Storm Will Have Many Eyes and Here Comes the Bailout, both from March.

The point? I think you get the point. The real estate party is over, baby. For anyone who believes it isn't, get a life. NO... really... get a life. Or a job, but those are going to get increasingly harder to come by as well.

What's going to happen? Well for starters, you can bet your bottom dollar that down payment requirements are going to increase. By the end of this year, you can count on needing a minimum 10% down payment on any sort of conventional type mortgage. Don't believe it? Zero down is gone. 3% down is gone. 5% down is currently available only in "non-declining markets" of which there are few. FHA is increasing their down payment from 3% to 3.5% on October 1st.

Wasn't it just about a year ago there was talk of lowering FHA's minimum requirement to "help" homeowners? What happened to that?

Things got worse. That's what happened. The bottom is nowhere near. We've got another 20%to go. Foreclosures are at a 30 year high, deliquencies are almost 9% on PRIME mortages, Alt-A is getting worse and subprime (remember that term?) is still going bad at a 25% clip. The inventory of available homes for sale is rapidly rising.

Now throw in hundreds of thousands of job losses and a broadly weakening economy. You get the point.

Who Do YOU Believe?

2008-08-18T22:53:00.003-04:00

As part of my series on the Who, What, Why, When and Where of this tragic tale...

I present the WHO.

Today, we see that Fannie and Freddie are once again on the verge of collapse. But wait... here comes Uncle Sam to the rescue. You know... the government bailing them out.

Who let this happen? Who is going to fix it? Who is going to pay the price?

Easy. We did. We are. We are.

Why "We" and not the banks, brokers, agents, appraisers, financiers or the government? Really. Why not?

This is a question I've thought about over and over for the last 2 years. You see... I'm a mortgage professional. I've been helping people get mortgages for 19 years. I've been a broker and a banker. I've seen good credit and bad. I've watched thousands of people "over-buy" pushing for that sliver of the American Dream. All the while, lending standards slowly began to disappear ultimately, in my opinion, disappearing all together. When you can offer 100% financing on a NO DOCUMENT loan... there is no such thing as an underwriting standard. As a matter of fact, there was, if you will, no such thing as an actual underwriter during that time. Sure, there were people called underwriters, but essentially all they did was check to make sure applications and disclosures were signed and dated correctly but beyond that... well.. you can do the math.

There's a finger pointed in every direction on this one. The banks are pointing at the appraisers and the brokers. The brokers are pointing at the banks. The appraisers are pointing at the brokers and the banks. Analysts are pointing at the Government. Analysts are also pointing the finger at the banks, brokers, appraisers and the buyers.

My first inclination was to point the finger at the Government. After all, it's our Government who encourages things like spending our tax rebates. It's our Government who encourages us to borrow more and more. Just look at what they do... our National Debt is crushing us. We borrow.

Then it hit me. Our Government. We, the people. Sound familiar? We are the Government. We are the banks, the brokers, the appraisers, the financiers, the representatives, the agents and the buyers. We did it. We knew it wouldn't last. We did not want to believe it could end, so we turned the other cheek and ignored the problem. It's all of us. It's our fault. We have no one to blame but ourselves.

The real question here is "Who will fix it?"...

We will. How? Well, that is the 65 million dollar question, now isn't it. One thing I can tell you is that our current form of Government won't do it. They continue to lie to us on a daily basis about the severity of the problem.

Remember the subprime issue? That was a good one. According to Hank Paulson, Ben Bernanke and company, that was over oh... about a year ago. Remember the housing market? Didn't that bottom out 5 or 6 times now? Consider New Fears Of A Fannie and Freddie Bailout Hit Shares and Foreclosure Plague Widens, both recent articles from CNN on the ongoing and widening process.

Freddie Mac is continuing to assert the insane fact that they are adequately capitalized. Please. Stop lying to us. Our Government continues to attempt to artificially prop up already INSANE housing prices by passing meaningless bailout legislation like the Housing Bill just inked. PLEASE... STOP LYING TO US.

WAIT... If WE are the Government, aren't we STILL LYING TO OURSELVES??

Really, America... Who HAVE we become? WHO ARE WE?

Self respect has disappeared.

Coming Soon To A Digital Download Near You: The iTax

2008-08-12T17:06:00.006-04:00

My series on the WHO, WHAT, WHERE, WHEN, and WHY of the credit crunch steps aside briefly...

And on a humorous note (though not really, if you think about it), I've come across this little tidbit:

A Proposed Tax on Digital Downloads

Interesting read. The basics are simple... you download a 99 cent song from iTunes, you pay the state sales tax. I'm not going to bore you with the details... click the link above to read the article.

One thing I did think was funny, though, was that the guy from NetChoice, and industry tech group lobbying against the tax uses the argument that downloads are eco-friendly as opposed to all the pollution casued by transporting CD's to and from stores.

"With global warming and a world that's running out of oil, the last thing
governments should do is add taxes on something that uses no oil and produces no
carbon," said Steve DelBianco, executive director of NetChoice. "A digital
download is the greenest way to buy music, movies, and software, since it
requires no driving to the store, no delivery vans, and no plastics or
packaging."

Really. That's funny.

The dollars and sense of it, however, tell a consistant story. As you
can see from the article,

"Including Nebraska and Tennessee, there are 17 states, plus the District of Columbia, that tax digital downloads, according to our earlier research: Alabama, Arizona, Colorado, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Maine, New Jersey, New Mexico, South Dakota, Texas, Utah, and Washington."

Anyone in any of those states realize this? It would be interesting to know.

Anyway... look for this idea to gain support nationwide and even and attempt to push this to a congressional vote. Keep in mind I said attempt.

Regardless... states are hurting for tax dollars, as they, too, became serious consumers through this boom, and as foreclosures rise and employment falls, any thing that can generate significant revenue to shore up bleeeding budgets will be fast tracked....

Ask not for whom the bell tolls....

2008-06-13T10:30:00.006-04:00

It's been a few months since my last post, and a lot has happened. It isn't easy reporting on the downfall of the American Economic Tragedy every day, especially with a family the size of mine.

It also isn't easy watching the industry you've been a part of and dedicated your career to literally self-combust right in front of your eyes. In other words, it can get darned depressing at times.

Family and personal obligations have made it a little hard to keep Wreckonomics up-to-date, but let's give it a try...

Hmmm... since we last spoke...

Foreclosures continue to spike to all time records

FHA has reported a 4.6 Billion dollar loss

Lehman is ready to collapse

Consumer Sentiment is at a 25 year low

Unemployment is beginning to spike

Freddie Mac is insolvent

Fannie Mae is insolvent

The Government Bailed Out Fannie and Freddie with our money

GM is on the verge of Bankruptcy

IndyMac Bank has failed

Countrywide is being sued by multiple states

Yep...

Status quo for the great unwinding of American Capitalism.

What I find most intriguing is that our government continues to sugar-coat all of this as if there is an easy way out. Our government continues to spin this massive bailout as a good thing for all of us. I think I can sum it up with a little "Who, What, Where, When and Why?"

Who

Wall Street and The Federal Government

What

The American Citizens' financial well-being

Where

The entire world

When

The last 40 years up until this very second

Why

Greed.

The focus of my next few posts will be an expose on just that... the Who, What, Where, When and Why of the great fall of our American Empire. Make no bones about it, folks, that's what we are. Of course, History and God will be the ultimate judges of this great experiment...

What Happens When The Fed Runs out of Money?

2008-04-09T15:02:00.002-04:00

The easy answer would be they print more! Without getting into all of the implications of just printing money (as the Fed wouldn't actually do that) what most don't realize is that the Fed actually does have a finite amount of money to lend.

Once the balance sheet is cleared, they must petition congress for the ability to sell more Treasury Bills in order to keep themselves liquid.

This is precisely where the Federal Reserve is headed. And this is also precisely right up "bail out alley".

Consider the following from SafeHaven.com:

"Whoever believes that the most recent Fed/JP Morgan heist to acquire Bear Stearns, along with other simultaneous and preceding Fed actions, were "successful" had better check again.

The current crisis is so severe, and it has already forced the Fed to reach into its own balance sheet grab-bag so deeply, that a very legitimate question arises, and the question is this: when the Fed ploughs all the way through its own balance sheet and gets to the bottom of the barrel, who will bail it out?

Before boring you to tears with the gory details, I can give you the answer right now:

You will.

And so will I, and every other American. Isn't that nice of us?...

So, how will you bail out the Fed, then?

(I wish I had published this article earlier, because I have been playing around with a draft for over a week now. Had I done so, could have bragged about my "prescience." However, when it comes to the Fed and other corrupt power centers in today's world (or that of ant day and age), all you have to do is assume the worst case scenario, and you'll be pretty much on target.)

The point: You will bail out the Fed because, once the Fed burns through its balance sheet of US treasuries with its current Term Securities Lending Facility (TSLF), it can only get more treasuries onto its balance sheet by having Congress allow the Treasury to borrow more money from the Fed than the Treasury really needs."

A stunning revelation, but one that smacks of truth. Consider this Wall Street Journal article, which says:

"WASHINGTON -- The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail.

Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed's name rather than the Treasury's; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011."

Let's consider that for a moment.... ok, moment's gone. Having the treasury borrow more money that it needs is clearly a scary thought. But a consistant one, at that. Hasn't the government been encouraging ALL Americans to borrow more than they need for the sake of our red hot economy for the last 20 years?

It's times like these and "solutions" like those that betray the true intentions of our Wreckonomy. Congress will give the Fed the authority to lend on Congress's behalf. Keep the money pumping into the system. Money to prop up values on billions of dollars of worthless assets. Money to pour over insolvent institutions. So much money that we never really see the actual issues.

In the end, when all else fails and the true nature of the giant credit virus comes into full view... Congress's debt is OUR debt. Your debt. My debt. America's debt.

Thus, the bailout marches forward.