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Archive for October 26th, 2010

The Tombstone Blues

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by James Howard Kunstler
Posted originally on October 25, 2010

THE LATEST VERSION OF PRETEND – GOING ON A COUPLE OF WEEKS NOW – is the nation whistling past the graveyard of mortgage documentation fraud while skeletons dance around everything connected with the money system. Halloween came early this year. The USA is getting to look like one big Masque of the Red Death, so I suppose it’s convenient that our pop culture has been saturated with vampires, zombies, and werewolves for a decade, coincident with the self-cannibalizing of our economy.

Something in the zeitgeist told us to get with the program of a twilight existence. We’re well-schooled now in the ways of the undead, operating under cover of darkness, going for the neck at every opportunity, even eating our young – if you consider the debt orgy, both private and public, as a way to party like it’s 1999 by consuming your children’s’ future.

The big banks leading the charge of the anthropophagi are making like it’s no big deal that notes representing money lent have become mysteriously dissociated from the mortgages that secure them. In the good old days, these things traveled in pairs, like boy-and-girl, Laurel and Hardy, a horse and carriage. It made for straight-forward property transfers, where Person A could be confident he was buying something free and clear from Person B. What a quaint concept, free and clear!

Nowadays, these documents can hardly be located at all – not such a surprise, really, since they were ground out like e-coli infested bratwursts in strip-mall boiler rooms run by former used car salesmen, and pawned off wholesale (literally) on banks who served them up sliced-and-diced, sloppy Joe style, on CDO buns to credulous pension funds, cretinous insurance company yobs, double-digit IQ college endowment managers, and other such nitwits bethinking themselves the reincarnation of Bernard Baruch, not to mention foreign sovereign nations who bought this smallpox-blanket-grade investment paper by the container-ship-load and, finally, the innovative geniuses at the very banks who engineered the stuff and got stuck with tons of it themselves when, as they say, the music stopped.

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The Perfect No-Prosecution Crime

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by Greg Hunter
Posted originally 25 October 2010

DID YOU KNOW THAT IN THE AFTERMATH OF THE SAVINGS AND LOAN (Thrifts) scandal there were more than a thousand felony convictions of financial elites? The cost of the wrongdoing associated with the rip-off and closure of nearly 800 Thrifts cost taxpayers more than $160 billion. The current sub-prime/mortgage-backed security scandal is 40 times bigger according to Economics professor William Black. That means the size of the crime is $6.4 trillion by my calculation. Can you guess how many indictments there have been on financial elites who created this enormous mess?  Zero, none, nada, zip. Yes, not one single prosecution or conviction has been started or achieved.

That is simply outrageous considering the width and breadth of the many crimes committed. There was “rampant” mortgage fraud in the loan application process according to the FBI as far back as 2004. There was real estate document fraud when the original Promissory Notes and loan documents were “lost.” The Promissory Notes were required to create tens of thousands of mortgage-backed securities (MBS). No “note,” no security. That is security fraud. No security means the special IRS tax treatments for the MBS’s were fraudulently obtained. That is IRS tax fraud. Because there were no documents, the rating agencies fraudulently made up triple “A” ratings for the securities. When the whole mess blew up, big banks hired foreclosure mill law firms to create forged documents. That phony paperwork was and is being used to wrongfully remove homeowners from their property. That is foreclosure fraud.

It appears to me the entire mortgage/securitization industry is one giant criminal enterprise. And yet, last Wednesday, Housing and Urban Development Secretary Shaun Donovan said, “We have not found any evidence at this point of systemic issues in the underlying legal or other documents that have been reviewed”. What! Well, look a little harder Mr. HUD Secretary. Donovan did say the foreclosure fiasco is “shameful” but that is not the same as a criminal prosecution now is it? Where is U.S. Attorney General Eric Holder in all of this? I guess he’s busy planning a lawsuit to stop California from making pot smoking a misdemeanor. Holder is probably also very busy with continuing legal actions against Arizona’s immigration law. I guess trillions of dollars in mortgage and securities fraud is just not enough of a legal priority for America!

All 50 State Attorneys General are looking into what is now being called “Foreclosuregate.”  Iowa AG, Tom Miller, is leading the investigation for the 50 states.  His focus, according to a recent Washington Post story, is “preventable foreclosures ones in which small changes might keep the homeowners in their home – benefits all parties involved. The borrower keeps the house. The servicer continues to collect fees, and the investors receive more income than a foreclosure would bring. The community has one less deserted home”. Miller’s office also says, “This is a public policy issue”.

When did State AG’s become public policy negotiators for the banks? Where are the criminal prosecutions? This is a sham and an outrage perpetrated by state governments. Who are they protecting? I say it’s really the banks’ and investors’ income stream.

It sure doesn’t look like the FBI is going to prosecute any of the “rampant” mortgage fraud any time soon, according to Professor Black. At the end of September on the Dylan Ratigan Show, he said, We know that the FBI has formed what it calls a partnership with the Mortgage Bankers Association. Now, that’s a trade association of the perps, and guess what the trade association said: ‘Hey we’re the victims. You know none of the bad stuff happened because the lenders wanted to engage in this fraud,’ and the FBI believed them if you can believe that!

Black is not just some angry academic. Besides being a Professor of Economics at the University of Missouri KC, he is also a former bank regulator and an expert in crimes committed by CEO’s. He thinks Treasury Secretary Tim Geithner and Attorney General Eric Holder should be fired so real regulators can get to work on prosecutions of crime throughout the entire industry. And get this, just last week, Black adamantly claimed that “major frauds continue” at all the big banks.

Again, Black said, “80% of the loans were fraudulent.” He also said in this segment (but wasn’t included in the clip) that, securitized mortgage instruments are all fraudulent”. That means trillions of dollars in MBS’s are worthless!  Foreclosuregate is a gargantuan financial mess, and federal and state regulators have not found a single crime in all of this to prosecute? Clearly, the U.S. government and both political parties are shielding the perpetrators. Oh wait!  The SEC did fine Angelo Mozilo, the former head of Countrywide Financial Corp., $67.5 million in penalties to settle civil fraud and insider-trading charges. Mozilo ripped-off hundreds of millions of dollars, and he pays a fine that amounts to a parking ticket for a man of his wealth? Is that the same as a criminal prosecution? I don’t think so!!

So, if you are or have been committing document, tax, security, rating or foreclosure fraud, you don’t have a thing to worry about. Keep doing what you’ve been doing because you are committing “the perfect no prosecution crime.” According to the financial elites, these crimes are essential to keep the American economy running smoothly.

War On?

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by Bruce Krasting
Originally posted October 24, 2010

THE G20 WAS A PREDICTABLE DUD. OUR BOY TIM G. WENT TO KOREA TRYING TO SELL a plan to limit external deficits to 4%. This was Ayn Rand utopian economics that does not work in real life so all the other ministers said “No thanks”. There was talk in the final communiqué that currencies should not be manipulated. That was just talk. I love it when they use words like “refrain”. What does that exactly mean?

“Countries should refrain from competitive devaluation of currencies”

The real comment on currencies came from Yoshida Noda, Japan’s finance minister:

“A prolonged appreciation in the yen is not good for Japan’s economy. Our stance, that we will take appropriate, bold action if needed, is unchanged.”

That sounds like fighting words to me. So much for peace and love from the G20. But what does “If needed” really mean? Since nothing happened this weekend the question is how is the FX market going to read it? The logical reaction to a status quo G20 is for status quo FX action. Generally speaking that means a weak dollar play. I would not be surprised to see USDJPY trade below 81.00. The Euro will try to catch a bid over 1.40.

So we have an interesting test of the market in front of us. Do we take another big leg down in the dollar? Or does the market just try to do that and back away?

A weak dollar move would be a “risk on” market. One thing fighting against the weak dollar story is that I see little evidence that the rest of the market actually wants to take more risk on. The tail is wagging, but the dog is not.

One thing I thought was interesting from the statement:

The United States and Britain, both with large deficits, agreed to be “vigilant against excess volatility and disorderly movements in exchange rates.”

That is new. It does not mean much as the adjustments taking place have largely been orderly. It does open the door for coordinated intervention should things actually become disorderly. This statement is most certainly a measure of what the G 20 ministers are worried about. Their worst fear? A run on the dollar. The catalyst for a run would come from Bernanke. The German finance minister made that clear:

“I tried to make clear that I regard that (QE-2) as the wrong way to go. An excessive, permanent increase in money is, in my view, an indirect manipulation of the exchange rate.”

I wonder if Bernanke even listens to this. He probably spent his Sunday looking over a textbook on the (last) Depression. Why is this man smirking, no, smiling?

Photo: Associated Press

Ask a Stupid Question…

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by williambanzai7
Posted originally Zero Hedge, October 25, 2010

“The question isn’t who is going to let me, it is who is going to stop me?”–Ayn Rand

WITH THE SWIRLING FRAUDCLOSURE CRISIS HEATING UP literally by the trading hour, I thought I would take a look at Dr B’s speech this morning to see if I could glean how His Helicoptership sees the “big fraudclosure picture.” I am not a PhD in the art of Fed speak, so the first thing I did was run the speech through a visual word cloud generator. Here is the result:

Hmmm… the words mortgage and foreclosure figure prominently. Not surprising since the conference is titled: “Conference on Mortgage Foreclosures and the Future of Housing.” I see the word crisis, at least he will ackowledge that much. However, I don’t see the words “possible systemic fraud” anywhere, do you?  I don’t see the words “accountability,” “purge” or “confidence” either.

I then read the speech iself, which talks a lot about a FED program called “MORE” and a Treasury/Dept of Labor unemployment task force called “HOPE NOW.”

MORE… HOPE NOW, feel better?

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Scholarly Bernanke gets an ‘F’ in the Real World

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by Steven George Fair
Originally posted on Rick Ackerman’s “Rick’s Picks”, October 26, 2010


Federal Reserve System

2005-2006    Chairman of the U.S. President’s Council of Economic Advisers

2002-2005    Board of Governors of the Federal Reserve System

1990-2002    Member of the Academic Advisory Panel

1987-1989     Visiting Scholar, Philadelphia

1989-1990     Visiting Scholar, Boston

1990-1991, 1994-1996   Visiting Scholar, New York


1996-2002   Chairman, Princeton Dept. of Economics

1985-2002   Professor of Economics and Public Affairs, Stanford

1983-1985   Associate Professor of Economics, Stanford

1979-1983   Assistant Professor of Economics, NYU Department of Economics

1989-1990, 1993 Visiting Professor of Economics Education, MIT


1979    Ph.D. in Economics, Harvard

1975    B.A. in Economics, Summa Cum Laude, Harvard

Awards and Achievements

Harvard: Best undergraduate economics thesis; outstanding senior in the Economics Department. Guggenheim fellowship. Sloan fellowship. High school valedictorian. Received a 1590 out of 1600 on the SAT. Self-taught calculus. South Carolina state spelling bee winner.

Books Authored: Essays on the Great Depression; Macroeconomics textbook; Principles of Economics; Principles of Microeconomics; Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment.


All Theory, No Experience

Our Fed chairman is certainly no slouch, as his resume makes clear. No one would dare question the intellect of the man.  No one would dare challenge his education under the cadre of theory-producing progressive think-tanks. But what do we really have from Ben Bernanke other than a theory on how the Great Depression only got worse? And another on how a mere man can defeat the Laws of Nature and natural cycles?

We as a culture have bet our future, and the future of our great-great grandchildren, on voting for progressive legislators, who for the most part have not even worked a summer job at hard labor, or run a business of any kind except a corporate bank.

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The REAL big story for financial markets today… Which no one is talking about

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by Graham Summers
Originally posted on October 22, 2010

YOU HAVE TO READ BETWEEN THE LINES ON THIS ONE. Few commentators realize what the BIG story is for the financial markets today. The BIG story is not the mortgage fraud, the corruption, or the computerized trading (although the last one dominates US stock markets’ daily action).

No, the big story is the monetary actions of the massively indebted US vs. the credit cooling China.

Indeed, while Bailout Ben Bernanke and several his cronies at the Federal Reserve have been braying for additional QE and currency weakness, China has been aggressively restricting credit lending, raising interest rates, and generally making moves to cool its overheated system.

In plain terms, this is a conflict between the world’s old superpower (its largest debtor nation) and its rising new superpower (its largest creditor nation). It represents the largest conflict in global financial markets as well as THE most significant development to watch for those looking to successfully trade the markets.

Don’t forget, this was ALSO the big story dominating the financial markets in 2008 as well. I know, the banking Crisis took the headlines. But it was China’s stockpiling of commodities that created the massive “inflation trade” imbalance which saw oil at $150 a barrel, commodities across the board exploding higher, and the US Dollar hitting a 20 year low.

Remember how that played out when the trend reversed? Commodities and equities collapsed across the board as the US Dollar exploded higher. This, in turn, kicked off the Dollar short-covering explosire, which began the chain of events leading into the Autumn of 2008.

Now, consider that we are in precisely the same environment today. Once again, talk of the US Dollar collapsing is everywhere.  The whole world is piling into commodities, especially Gold. And US traders are actually MORE bearish on the US Dollar today than they were in 2008.

The reason I bring all of this up is that I am beginning to pick up on signs that the US and China may in fact be trying to reach some kind of backroom deal on the “currency” issue. Given the current lopsided balance of the financial markets, you can imagine the impact this deal would have if my suspicions prove correct.

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