This is the last ad put out by Global Crossing before they crossed the River Styx and died. From 7/17/7.July 17, 2008
Elaine Meinel Supkis
Today is the anniversary of the 7/17/7 end of the Western Banking system. On this day, last year, it all collapsed suddenly with a roar as the Japanese carry trade abruptly ended. The US housing crisis was visible but not all that big yet. People in the know that saw the charts for all the mortgage resets knew that things would rapidly deteriorate but this didn't bother the big bankers. They were still engineering buy-out/take overs of all and any businesses they could lure into this debt trap. Today, the Washington Post has a long series of good stories about the rot and corruption at the core of the Fannie Mae/Freddie Mac mess. And the FBI is now going after the tax cheats and pirates overseas. Many changes are afoot.
New 20% Down Payment Makes Savers From U.S. Spenders
(Bloomberg) -- The U.S. housing crisis may accomplish what years of parental hectoring couldn't: Turn Americans from spenders into savers.Spending will fall because homeowners can no longer use rising real estate values to borrow cash -- $837.5 billion in 2006, according to a report by former Federal Reserve Chairman Alan Greenspan and senior Fed economist James Kennedy. With mortgage lenders requiring down payments of 20 percent, the average household, which puts away less than 1 percent of after- tax pay, will have to save 10 percent for 10 years to buy a home.
The housing market shaved almost 1.6 percent off gross domestic product growth in the first quarter and cut in half the growth rate of consumer spending, which accounts for more than two-thirds of the economy, said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania.
I always put down more than 20% on houses. I thought this was normal. Just 20 years ago, no one got 30 year mortgages, either. You didn't need these things! Today, a fancy SUV-sized car costs more than a house did in 1978. People used to mostly pay cash for cars back in my youth. Now, everything costs much, much more and require huge principal loads which means everyone needs cheap loans. Or rather, cheap loans have inflated everything that requires loans to the point, no one can pay cash anymore.
The big squeeze is on. People won't go happy house hunting if they must first get a hold of 20% cash. For example, if you already own a house, you have to sell it first before jumping into buying another house. In the old days, when you got a contract signed but not closed, you could get a 'bridge loan' that was for 30 days which was the down payment for the next property. But then, insidiously, as people slid into debt, these bridge loans became second loans that were piled on top of the debts sitting on houses. So people essentially were putting their homes under 100% debt.
The Washington Post has some fabulous stories for once: The Fannie-Freddie Dodge
THE PARLOUS financial condition of Fannie Mae and Freddie Mac threatens the global economy. Treasury Secretary Henry M. Paulson Jr.'s request for standby authority to lend the mortgage giants more money and, if necessary, inject capital seeks to reduce this "systemic risk." Democratic leaders in Congress plan to attach the Fannie-Freddie rescue to housing legislation already passed by the Senate and slated for House consideration. Strangely, though, both the Senate and House versions of the bill potentially increase the very risks Mr. Paulson's plan is intended to mitigate.Both measures would encourage Fannie Mae and Freddie Mac to buy bigger mortgages on the secondary market (which they would then either hold or sell as guaranteed securities to investors). Ordinarily, the government-sponsored enterprises (GSEs) buy high-quality loans under $417,000 for a single-family home. This "conforming" loan limit not only limits taxpayer risk, it also anchors the profit-hungry GSEs to their statutory mission: supporting affordable housing. Earlier this year, as clouds were already gathering over the GSEs, Congress raised the limit -- to almost $730,000 in certain high-cost areas -- on the theory that Fannie and Freddie could help unfreeze the housing market. The measure was supposed to be temporary. But the pending Senate and House bills impose permanent increases. The Senate would go up almost 50 percent, to $625,000. The House, led by Speaker Nancy Pelosi (D-Calif.), who represents the pricey San Francisco Bay Area, is considering a $730,000 cap. Either way, Congress would be authorizing the GSEs to pile more risk onto their already staggering balance sheets, and mostly for the benefit of buyers and sellers of expensive houses.
When the political classes united to increase the debt levels at Fannie Mae and Freddie Mac, many of us online bears all yelled in unison. As per usual, no one listened to our roars of rage. The housing market 'froze' because the value of houses hit a ceiling that it can not go past. Houses now cost far, far too much. When the Federal Reserve began to raise interest rates in 2005, this action immediately squeezed the profit margins of the bankers lending to house buyers. The differential between mortgage rates and the Fed's lending rate when it was at 1% was immense. Any fool could make a profit, lending to home buyers.
Fannie Mae and Freddie Mac, since they are both quasi-government entities similar to the way the Federal Reserve is, are run by corrupt people put in positions of power by corrupt politicians who are owned by pirates and con artists. So of course, the machines set up to lend money to lower class people ended up lending to all and sundry as the level of buying loans rose and rose along with the hyper-housing bubble. This bubble began long ago when Reagan took office and inflation was declared 'under control'.
Day by day, year by year, houses rose in value. Lending became cheaper and cheaper. So housing went higher and higher. Just this year, I saw an article in a major magazine about how it was BETTER to have low interest loans and a higher house price than the reverse! No mention of paying off the principal if the value dropped below the loan's cost. Nor was there any mention about how a 30 year mortgage ends up more than doubling the price of the house in the end!
So the usual Californian $450,000 house actually costs the buyer of this inflated house ONE MILLION DOLLARS. 'Tis a lot of money, I do say. Here is the killer trick: Fannie Mae and Freddie Mac don't make mortgages, they BUY mortgages. And the value of the mortgage includes the over-all extra cost of the interest due. So when a house that was sold for $450,000 in San Francisco goes belly up and has to be taken back and can't be sold for more than $300,000, this means a loss of $550,000 in future interest AND the loss of $150,000. All the talk about lowering interest rates on people who are in trouble as well as lowering principal means tremendous present and FUTURE losses. Unlike the Great Depression where the future losses were for 20 years or less [note that it took nearly 20 years to crawl out of that depression!] this one is based on 30 years of future losses!
Undoing this will be very difficult. For all the bonds and CDOs passed around were all sold based on the idea that these long-term loans would pay off since inflation was dead. This belief is due to lies from the Federal Reserve and our politicians as well as an army of economists who are incredibly naive or outright liars.
Even if NOTHING happens except for high inflation and a dying dollar, ALL the mortgages written up during the 1% Fed regime are BAD. THEY ARE TOO LITTLE. They don't make up for inflation! So even if the owners pay faithfully, they are STILL worthless! Only if we keep inflation for the next 30 years below 3% will any of these cheap-rate mortgages be worth anything to anyone! Who on earth wants to hold a mortgage for 30 years that loses 1-5% of its value as the home buyers pay these things off with increasingly worthless dollars?
NO ONE! This is the hitch that has killed the banks, Fannie Mae, Freddie Mac and soon, our Treasuries we sell overseas and all those stupid, useless buy-up/buy-out debts bankers piled on all our businesses! These are also pretty worthless in the future. This is why the people stuck with these papers are angry and demanding we strengthen the dollar and kill inflation.
By Robert D. Novak
As financial storm signals appeared the past 18 months, some Bush officials urged drastic reform of Fannie Mae and Freddie Mac. But, according to internal government sources, Treasury Secretary Henry Paulson objected because it would look "too political." The Republican administration kept its hands off the government-backed mortgage companies that are closely connected to the Democratic establishment.Paulson is a Republican, but as head of the Goldman Sachs investment bank he had close ties with Democratic-dominated Fannie Mae.
After prominent Democrat James A. Johnson's departure from Fannie following eight years as chairman and chief executive, and after Johnson joined the ZymoGenetics biopharmaceutical firm, he was named head of Goldman Sachs's compensation committee, helping to set Paulson's abundant salary there.
Here we go: the list of names, the connections. Congress, the Presidents and everyone involved in DC are thoroughly, totally corrupt. The growth of the lobby arm on K Street has been so great, it is now A-Z Street. Everyone has jumped into this game. When politicians 'retire' they actually retool themselves as lobbyists. And then there is the army of more anonymous workers for the top politicos who also migrate to the lobby side of the scale. In the past, there were stricter rules governing all of this. But no more. It is a total free-for-all. Or rather, a bribe circle jerk.
Many of these people cycle through various pirate coves and gnome head quarters. Gollum Sachs, being a hot spot for green skin guys, for example. The J.Pirate Morgan is another frequent flyer destination. When they pass through Fannie Mae and Freddie Mac, they go there not to get rich there but to get KNOWN there. As a jolly roger good buddy to the pirates and gnomes who run the economic system outside of the government. After doing the heavy lifting there, they get into the Golden Cave of Eternal Wealth and have a grand time there, stuffing their pockets with hot loot as fast as possible.
The rule is, one hand hands of loot to the other hand. So loot is rapidly moved from the public into the hands of the select rich. Wether it be money generated by the Pentagon spending like a drunken sailor on shore leave or any number of 'public service' initiatives, the chief business at hand is legalizing the movement of loot from the taxpayers or others and into the pockets of this select crew of criminals.
It was worse on Capitol Hill. When Republican Richard Baker represented Louisiana's 6th District, he could not find a single House co-sponsor for his reform bill. He lost his bid to become ranking Republican on the House Financial Services Committee, though he had seniority, and then retired from Congress to become a lobbyist.Republican Sen. Chuck Hagel had trouble finding other Senate supporters for Baker's bill.
Baker, Hagel and Richard Shelby, ranking Republican on the Senate Banking Committee, were rare members of committees with jurisdiction who took the issue seriously. The powerhouse Democratic overseers of the banking committees -- Rep. Barney Frank, Sen. Christopher Dodd and Sen. Chuck Schumer -- protected Fannie and Freddie.
If anyone interferes with the loot passing operations in DC, they are blocked from chairing committees or even thrown out of office. Note how the sponsor of a bill that wanted to reform Fannie Mae ended up joining the Other Side and now lobbies Congress and is busy trying to corrupt those who remain in that Whore House. The Democrats involved are mostly from around the Tri State Region of NYC and its various quarters. They help the bankers and Wall Street. And they mean well. Why, they want anyone, rich or poor, to be able to slide deep into debt! Wonderful.
There has been an ideological push to get everyone mired in debt vis a vis housing. As I keep saying, if you rent and the roof needs to be replaced, the landlord has to do it. If you are not happy with a rental, you pack your bags and depart. If your work is uncertain, you are not stuck somewhere due to inability to sell a house. People at the lower end of the economic ladder are forced to be semi-nomadic due to the difficulties of finding work. Recessions are seldom even. They vary very much from community to community. Because of these social forces, it is not in the interest of the lower classes to own homes. Indeed, it is decidedly against their interests!
Figures in Both Campaigns Have Deep Ties to Mortgage Giants
Rick Davis, McCain's campaign manager, was president of the Homeownership Alliance, which advocates the expansion of homeownership through low-interest mortgages funded by Fannie and Freddie. Arthur B. Culvahouse Jr., who is heading McCain's vice presidential vetting panel, was a lobbyist for Fannie Mae. Mark Buse, a longtime McCain aide, lobbied for Freddie Mac before returning to McCain's Senate staff.And the list of Republican Fannie and Freddie lobbyists includes some of its most notable rogues -- including Tony Rudy, Edwin Buckham, Kevin Ring and David H. Safavian, all of whom were linked to the Jack Abramoff lobbying scandal -- as well as some of its leading power brokers, from Reagan White House chief of staff Kenneth M. Duberstein to uberlobbyists Vin Weber and Tom Korologos. Alberto R. Cardenas, one of McCain's top fundraisers, has lobbied for Fannie Mae, as have former Montana governor Marc Racicot and tax-cut advocate Grover Norquist.
This second article about the tangled web of corruption that has utterly engulfed our entire political system is good in that is traces some of the threads connecting our 'representatives' to all sorts of gnomes, trolls and ghouls. All of whom bend their will towards interfering with the duties of our elected officials to serve the People and NOT the gnomes, ghouls and trolls that run about with fistfuls of increasingly worthless money, bribing everyone to do horrid things like pass that stupid 'bankruptcy bill' back in 2006 when it was obvious they all were terrified of people escaping paying off massive loads of loans. This bill was VERY unpopular and not one American citizen could influence anyone concerning the vote. And this lack of response is all over the place. Nearly 100% of Congress jumps to attention and barks when AIPAC orders them, for example.
And so it is with anyone who wishes for things that benefit the rich and powerful but harms or destroys or even kills, the average American voter who trusted some politician and voted for him or her. We are in yet another election cycle. And a record amount of money is in the system. About 30% of this money is raised by honest citizens who want to support candidates who represent their views on many things. But they are out-voted by the other 70% of donors who are rich people seeking favors that are BAD for the other donors as well as voters.
This is why Congress and the President both have very stinky polls right now. Both are less than 30%. Hey, that 30% is mostly the lobbyists and the lunatic fringe! Well, we can see from these stories that cleaning up this mess doesn't mean voting for either Democrats or Republicans.
Obama also has ties to the firms. James A. Johnson, the former head of his vice presidential vetting panel, was a chief executive of Fannie Mae, as was Franklin D. Raines, who said this week that he has been consulting with the campaign on housing issues. Maria Echaveste, a top Clinton White House official whose husband, Christopher Edley Jr., is a close Obama friend and adviser, has lobbied for Freddie Mac, and former commerce secretary William M. Daley, a top Obama backer, was an in-house lobbyist.Other Democratic luminaries who have advocated for the mortgage giants include strategist Steven Elmendorf, Rep. Doris Matsui (Calif.), former Al Gore aide Ronald A. Klain, former Clinton aide Steve Ricchetti and former congressman Harold E. Ford Jr. (Tenn.), now the head of the Democratic Leadership Council. Jamie Gorelick, a deputy attorney general in the Clinton administration, was also vice chairman of Fannie Mae.
That payroll has cost Fannie and Freddie nearly $200 million in lobbying and campaign contributions over the past decade, according to lobbying reports and Federal Election Commission disclosures. It has also won them plenty of protection from calls for greater regulation, less federal protection, and even nationalization.
First off: Fannie Mae and Freddie Mac should not be allowed to spend a PENNY on lobbying anyone. Ditto JP Morgan and Goldman Sachs. None of them should be allowed to do this. This is BRIBERY writ large. We have the Supreme Court to thank for this: they capriciously and unconstitutionally announced out of the blue that corporations are humans, not business organizations. This ruling turning groups of gangs into an individual meant they could be treated like citizens even if they were foreigners in association with American citizens. Lots of mischief has come out of this concept.
The thrift, with $32 billion in assets, was a prolific lender during the housing boom, specializing in so-called Alt-A loans that allowed buyers to borrow with little documentation of their finances. Losses are expected to mount among Alt-A mortgages as more borrowers decide to walk away from residential investment property plunging in value.
Why not arrest everyone? Call them 'terrorists' and since the President can hold them forever at Gitmo, take them there and torture them at least as much as we torture young boys there. America, as a nation of laws, is gone. This is the Soviet Union. So we might as well dispense with the legal stuff and go right into the draconian caprice.
Also, how can a 'Thrift' be a 'prolific lender'? That is certainly not thrifty. That is spend-thrifty. Calling themselves a thrift is a fraud. Grounds for arrest. Just like a banker can be a bank robber. But we are missing something here: the people who set things up in Congress and the Presidency made this mess possible There were rules, regulations and barriers to this sort of goofy nonsense. All swept aside by our 'representatives' we supposedly voted into office. Arrest them all!
Day of Reckoning? Super Rich Tax Cheats Outed by Bank Clerk
Hundreds of super-rich American tax cheats have, in effect, turned themselves in to the IRS after a bank computer technician in the tiny European country of Liechtenstein came forward with the names of US citizens who had set up secret accounts there, according to Washington lawyers investigating the scheme.
*snip*
The bank clerk, Heinrich Kieber, has been branded a thief by the government of Liechtenstein for violating the country's bank secrecy laws.
This story began in Germany when the government was the first to buy this valuable information from the guy who snuck it out of the gnome-wonderland of that tiny Alpine kingdom. Now, everyone is desperate for tax funds so everyone is sniffing around Liechtenstein, turning over shiny little rocks to see if there is any gold there. Maybe everyone will move to Jersey or Dubai to hide from the authorities. Or perhaps Antarctica. Rename it ' the Republic of Anarchy'.
Accounting Cleanup Board Is Facing a Gutting: Jane Bryant Quinn
(Bloomberg) -- Just when you thought that the drive toward better financial accounting couldn't be stopped, a stick may be shoved into the spokes. A decision expected soon from a federal court might throw the Sarbanes-Oxley Act into limbo. The law, also known as SOX, is essential to the movement for accurate and honest corporate reports. Congress would rescue SOX but perhaps with its beating heart cut out.A sideways challenge to the law is currently before the U.S. Court of Appeals for the District of Columbia Circuit. The question: whether the Public Company Accounting Oversight Board, created by SOX to clean up the Enron-tainted auditing profession, is constitutional. In a June 5 memo, Linda Lord, head of legislative and regulatory affairs for the banking giant UBS AG, called it ``highly likely'' that the PCAOB would lose its case. ``Not only will it be put out of business,'' she wrote, ``but SOX in its entirety will fall.''
That's because the law lacks a ``severability'' clause. If one of its provisions is found to be unconstitutional, the whole law goes down.
Lord may be wrong, of course. The court may decide the other way. But if it does strike down PCAOB, it couldn't come at a worse time for investors. The financial crisis linked to subprime loans left the valuation of trillions of dollars of securities in doubt. Nothing is more important to the functioning of markets than pulling reliable numbers out of this morass.
The Supreme Court and misrule on this as they seem bent on doing rather frequently. The Supreme Court is like celibate priests: they get no sex but they can green-light orgies for the rich gnomes. I suppose, this gives them some sort of general satisfaction at one remove.
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