Tax Apocalypse for States and Federal Government Can be Reversed: Show Me the Money!

SEE states-look-beyond-borders-to-collect-owed-taxes

states-ignore-obvious-remedy-to-fiscal-meltdown

tax-impact-of-principal-reduction

accounting-for-damages-madoff-ruling-may-affect-homeowner-claims

taxing-wall-street-down-to-size-litigation-guidelines

taking-aim-at-bonuses-based-on-23-7-trillion-in-taxpayer-gifts

payback-timemany-see-the-vat-option-as-a-cure-for-deficits

As we have repeatedly stated on this blog, the trigger for the huge deficits was the housing nightmare conjured up for us by Wall Street. Banks made trillions of dollars in profits that were never taxed. The tax laws are already in place. Everyone is paying taxes, why are they not paying taxes? If they did, a substantial portion of the deficits would vanish. Each day we let the bankers control our state executives and legislators, we fall deeper and deeper in debt, we lose more social services and it endangers our ability to maintain strong military and law enforcement.

The argument that these unregulated transactions are somehow exempt from state taxation is bogus. There is also the prospect of collecting huge damage awards similar to the tobacco litigation. I’ve done my part, contacting the State Treasurers and Legislators all over the country, it is time for you to do the same. It’s time for you to look up your governor, State Treasurer, Commissioner of Banking, Commissioner of Insurance, State Commerce Commission, Secretary of State and write tot hem demanding that they pursue registration fees, taxes, fines, and penalties from the parties who say they conducted “out-of-state” transactions relating to real property within our borders. If that doesn’t work, march in the streets.

The tax, fee, penalty and other revenue due from Wall Street is easily collectible against their alleged “holding” of mortgages in each state. One fell swoop: collect the revenue, stabilize the state budget, renew social services, revitalize community banks within the state, settle the foreclosure mess, stabilize the housing market and return homeowners to something close to the position they were in before they were defrauded by fraud, predatory lending and illegal practices securitizing loans that were too bad to ever succeed, even if the homeowner could afford the house.

Kansas: Waking up to discover the mortgage market was a giant criminal enterprise

Matt Taibbi in Huffington Post:

Waking up to discover the mortgage market was a giant criminal enterprise

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

via Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks.

This is a potentially gigantic story. It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages. The court ruled that the electronic transfer system used by the private company MERS — a clearing system for mortgages, similar to a depository, that is used for about half the mortgage market — is fundamentally unreliable, and any mortgage sold and/or transferred through MERS can’t be foreclosed upon, at least not in Kansas.

Coincidentally I’d been working on something related to this all day yesterday. All over the country, lawyers are contesting foreclosures because of similar chain-of-custody issues. I have some material about this coming out in my next Rolling Stone story, so I can’t get into this too much, but suffice to say the lenders and the banks were extremely sloppy about their paperwork (at best — there is a fraud angle as well) and jammed up the system with missing and/or mismarked mortgage notes. Since a sale isn’t legal unless there’s full transfer of the physical note, a lot of the sales of mortgage-backed securities were not entirely legal, since the actual notes were often not transferred.

Nothing like waking up in the morning and finding out a whole sector of the economy is completely screwed. Are these good times or what?

Although this particular case pertains to MERS, non-MERS mortgages were often even worse. Anyway I have more on this coming next week. Thanks again to Eric at MonkeyBusiness for the heads-up.

Housing Bubble: How We All Got Screwed

  • And now, because nobody stepped in before the flood began, a new industry is born — bigger than personal injury lawsuits — it the flood of claims under TILA, RESPA, RICO, Securities laws, common law fraud and state and federal laws concerning false and deceptive business practices. People will be rescinding or simply voiding their mortgage transaction through rescission remedies provided under statutory law and common law. They will be seeking and getting damages, treble damages, exemplary damages, punitive damages. Lawyers will be happy. Anyone who says the worst is behind us is, to say the least, overly optimistic.

The bottom line is pressure, greed, arrogance, power, and recklessness. In the excellent article that follows, you can pick out the trail of fraud and deception, self-deception and how “everyone” was on board with the mortgage meltdown and how everyone knew it would bust.

By false and deceptive representations, by improper relationships with rating “agencies” (actually private companies out to make a buck just like everyone else in the process) and by creation of complex instruments wherein the buyer relied on the integrity of the firms involved in the issuance of derivative securities, demand for these high yielding “no-risk” AAA rated securities was insatiable. Wall Street was awash in money and put the screws on everyone down the line including the borrower who would buy real estate that was as falsely appraised in value as the security that provided the the money to fund the loan.

What started as an innovative way to increase liquidity and disperse risk ended up being institutionalized theft. As the success of derivative securities (measured by sales and demand from investors) rose, so did the pressure on lenders to increase their “output” of loans, no matter how ridiculous. In fact, the more ridiculous, the better — because the the lower the grade of the borrower, the higher the interest rate.

By parsing and packaging loans together, mortgage aggregators were able to report that a loan which started out at 1%, negative amortization, adjustable rate, with resets every 3 months, was actually a 12% loan or more. This allowed the CDO manager to “secure” the top tranche in an SPV with “income” left over for the lower the tranches. It all looked so good on paper.

The pressure was on — lenders threw out all their underwriting standards, while they and mortgage brokers, appraisers, and others conspired to simply get that signature on the loan documents, the devil be damned if he/she paid anything on the loan.  Get rid of the escrow for taxes and insurance and “qualify” the borrower based upon the very first teaser rate and PRESTO! a guy with an income of $30,000 can get a mortgage loan of $1 million, with negative amortization and adjustments to his payments. Using the same tactics as the time-share sales people of times past, they assure the borrower that his lack of understanding of how he could get a mortgage so big is understandable, but that the world of finance, rising home prices that will continue to rise, and the integrity of the lender, the mortgage broker, the appraiser and underwriting department is something he can rely on. 

The more they ran out of people to make loans to the lower the standards for lending. Nobody cared because they knew they were just middlemen taking their cut out of the pie created by the investment of some money manager in asset backed securities that were neither backed nor had assets.  The fall would be taken by the investors in CDOs issued by SPVs, and holders of credit default swaps and synthetic derivatives that were too complicated for anyone to understand without the assistance of a computer powerful enough to run our defense department. 

Then the developer’s ran out of product, as prices skyrocketed and people were lining “free money” loans. So the lender’s threw construction loan money at the developers — and sent THOSE loans upstream to be securitized. Developer’s filed for hundreds of thousands of permits, completing the picture of a market that was in a permanent spiral upward. The illusion that there was not enough housing drowned out the little voices of older, wiser people, who asked “where is all this demand coming from and why had we not noticed it before?”

Cities, counties, states all revised their budgets based upon increased revenues and increased demands on their infrastructure. Now they are committed to projects, some of them started, without any prospect of being able to fund their completion. Local governments are looking to the Federal government to make up the shortfall — for good reason.

Those in the Federal government who had anything to do with legislating or regulating lending and securitization were receiving “perks” which sometimes were as simple as getting a mortgage loan under market and sometimes involved much more than that. Congress made sure they played their part with REMIC legislation ostensibly to prevent double taxation of “revenue” that was in actuality mostly smoke and mirrors. But in so doing, Congress institutionalized the process of fraud, deception and crisis.

And of course there was the Federal Reserve, which had opened its loan window to investment bankers, accepting as collateral the face value of virtually worthless securities. The window is not open to ordinary people who got screwed, or their cities, counties and states. It is only open to the people who caused the mess to begin with.

The fact that the foreclosure “race” was on and could only end in disaster was of little concern to the Federal Reserve in accepting those securities at face value. Only two outcomes were possible — either the house would be acquired by the lender (95% of the cases) and then left to rot, be vandalized and robbed of everything of value right down to windows, doors, wiring and plumbing — or the “inventory” of homes would be shifted from seller’s to “lenders” — with big question on who the “lender” actually is anymore. It certainly is not anyone who was present at closing.

In many cases the houses are subject to the first scenario as there are organized crime groups making a business out of stripping unoccupied dwellings. The COST of either demolishing the house or renovating the house back to salable condition with warranties exceeds the “value” of the land and any existing structure on it. Thus the value of this investment is either already less than zero or headed there. Thus the value of the securities accepted by the Fed at their window is negative. The holders of those securities are upside down just like the borrowers but the investment bankers and banks have the Fed. Everyone else has nothing. 

And now, because nobody stepped in before the flood began, a new industry is born — bigger than personal injury lawsuits — it the flood of claims under TILA, RESPA, RICO, Securities laws, common law fraud and state and federal laws concerning false and deceptive business practices. People will be rescinding or simply voiding their mortgage transaction through rescission remedies provided under statutory law and common law. They will be seeking and getting damages, treble damages, exemplary damages, punitive damages. Lawyers will be happy. Anyone who says the worst is behind us is, to say the least, overly optimistic.

PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP

MSN Tracking Image
The housing bubble, in four chapters
How homeowners, speculators and Wall Street rode a wave of easy money
By Alec Klein and Zachary A. Goldfarb
The Washington Post
updated 2:10 a.m. MT, Sun., June. 15, 2008

The black-tie party at Washington’s swank Mayflower Hotel seemed a fitting celebration of the biggest American housing boom since the 1950s: filet mignon and lobster, a champagne room and hundreds of mortgage brokers, real estate agents and their customers gyrating to a Latin band.

On that winter night in 2005, the company hosting the gala honored itself with an ice sculpture of its logo. Pinnacle Financial had grown from a single office to a national behemoth generating $6.5 billion in mortgages that year. The $100,000-plus party celebrated the booming division that made loans largely to Hispanic immigrants with little savings. The company even booked rooms for those who imbibed too much.

Kevin Connelly, a loan officer who attended the affair, now marvels at those gilded times. At his Pinnacle office in Virginia, colleagues were filling the parking lot with BMWs and at least one Lotus sports car. In its hiring frenzy, the mortgage company turned a busboy into a loan officer whose income zoomed to six figures in a matter of months.

“It was the peak. It was the embodiment of business success,” Connelly said. “We underestimated the bubble, even though deep down, we knew it couldn’t last forever.”

Indeed, Pinnacle’s party would soon end, along with the nation’s housing euphoria. The company has all but disappeared, along with dozens of other mortgage firms, tens of thousands of jobs on Wall Street and the dreams of about 1 million proud new homeowners who lost their houses.

The aftershocks of the housing market’s collapse still rumble through the economy, with unemployment rising, companies struggling to obtain financing and the stock market more than 10 percent below its peak last fall. The Federal Reserve has taken unprecedented action to stave off a recession, slashing interest rates and intervening to save a storied Wall Street investment bank. Congress and federal agencies have launched investigations into what happened: wrongdoing by mortgage brokers, lax lending standards by banks, failures by watchdogs.

Seen in the best possible light, the housing bubble that began inflating in the mid-1990s was “a great national experiment,” as one prominent economist put it — a way to harness the inventiveness of the capitalist system to give low-income families, minorities and immigrants a chance to own their homes. But it also is a classic story of boom, excess and bust, of homeowners, speculators and Wall Street dealmakers happy to ride the wave of easy money even though many knew a crash was inevitable.

Chapter I: ‘A lot of potential’
For David E. Zimmer, the story of the bubble began in 1986 in a high-rise office overlooking Lake Erie.

An aggressive, clean-cut 25-year-old, armed with an MBA from the University of Notre Dame, Zimmer spent his hours attached to a phone at his small desk, one of a handful of young salesmen in the Cleveland office of the First Boston investment bank.

No one took lunch — lunch was for the weak, and the weak didn’t survive. Zimmer gabbed all day with his clients, mostly mid-size banks in the Midwest, persuading them to buy a new kind of financial product. Every once in a while, he’d hop a small plane or drive his Oldsmobile Omega out for a visit, armed with charts and reports. The products, investments based on bundles of residential mortgages, were so new he had to explain them carefully to the bankers.

“There was a lot of education going on,” Zimmer said. “I realized, as a lot of people did, this was a brand new segment of the market that had a lot of potential, but I had no idea how big this would get.”

Zimmer joined the business as enormous changes were taking hold in the mortgage industry. Since World War II, community banks, also called thrifts or savings and loans, had profited by taking savings deposits, paying their customers interest and then lending the money at a slightly higher rate for 30 years to people who wanted to buy homes. The system had increased homeownership from less than 45 percent of all U.S. households in 1940 to nearly 65 percent by the mid-’60s, helped by government programs such as G.I. loans.

In 1970, when demand for mortgage money threatened to outstrip supply, the government hit on a new idea for getting more money to borrowers: Buy the 30-year, fixed-rate mortgages from the thrifts, guarantee them against defaults, and pool thousands of the mortgages to be sold as a bond to investors, who would get a stream of payments from the homeowners. In turn, the thrifts would get immediate cash to lend to more home buyers.

Wall Street, which would broker the deals and collect fees, saw the pools of mortgages as a new opportunity for profit. But the business did not get big until the 1980s. That was when the mortgage finance chief at the Salomon Brothers investment bank, Lewis Ranieri — a Brooklyn-born college dropout who started in the company’s mailroom — and his competitor, Laurence Fink of First Boston, came up with a new idea with a mouthful of a name: the collateralized mortgage obligation, or CMO. The CMO sliced a pool of mortgages into sections, called “tranches,” that would be sold separately to investors. Each tranche paid a different interest rate and had a different maturity date.

 

Investors flocked to the new, more flexible products. By the time Zimmer joined First Boston, $126 billion in CMOs and other mortgage-backed securities were being sold annually. “Growth is really poised to take off,” Zimmer thought.

After a few years at First Boston, Zimmer eventually ended up at Prudential Securities on the tip of Manhattan near the World Trade Center, selling increasingly exotic securities based not only on mortgages but also credit card payments and automobile loans.

As Wall Street’s securities grew more complex and lucrative, so did the mathematics behind them. Zimmer would walk over to Prudential’s huge “deal room.” The room was filled with quantitative researchers — “quants” — a motley crew of math wonks, computer scientists, PhDs and electrical engineers, many of them immigrants from China, Russia and India. The quants built new mathematical models to price the securities, determining, for example, what borrowers would do if interest rates moved a certain way.

The industry, which came to be known as structured finance, grew steadily. Zimmer grew with it. He got married, raised two kids and climbed to the level of senior vice president, a top salesman at Prudential.

Zimmer’s clients through the 1990s were mutual funds, pension funds and other big investors who dealt in big numbers: sometimes hundreds of millions of dollars. He’d get up at 4:30 a.m., be out of the house by 5, catch the 5:30 train from Princeton, N.J., be locked to his desk for 10 hours, devouring carbs — pizza, lasagna — and consumed by stress, but thinking nonetheless, “It was so much fun.”

 

Chapter II: ‘Extraordinary’ boom
April 14, 2000. A rough day on Wall Street. The technology-laden Nasdaq stock index, which had more than doubled from January 1999 to March 2000, falls 356 points. Within a few days, it will have dropped by a third.

Although the business of structured finance grew during the 1990s, Internet companies drew the sexiest action on the Street. When that bubble popped, average Americans who had invested in the high-flying stocks saw their savings evaporate. Consumer and business spending began to dry up.

Then came the 2001 terrorist attacks, which brought down the twin towers, shut down the stock market for four days and plunged the economy into recession.

The government’s efforts to counter the pain of that bust soon pumped air into the next bubble: housing. The Bush administration pushed two big tax cuts, and the Federal Reserve, led by Alan Greenspan, slashed interest rates to spur lending and spending.

Low rates kicked the housing market into high gear. Construction of new homes jumped 6 percent in 2002, and prices climbed. By that November, Greenspan noted the trend, telling a private meeting of Fed officials that “our extraordinary housing boom . . . financed by very large increases in mortgage debt, cannot continue indefinitely into the future,” according to a transcript.

The Fed nonetheless kept to its goal of encouraging lending and in June 2003 slashed its key rate to its lowest level ever — 1 percent — and let it sit there for a year. “Lower interest rates will stimulate demand for anything you want to borrow — housing included,” said Fed scholar John Taylor, an economics professor at Stanford University.

The average rate on a 30-year-fixed mortgage fell to 5.8 percent in 2003, the lowest since at least the 1960s. Greenspan boasted to Congress that “the Federal Reserve’s commitment to foster sustainable growth” was helping to fuel the economy, and he noted that homeownership was growing.

There was something very new about this particular housing boom. Much of it was driven by loans made to a new category of borrowers — those with little savings, modest income or checkered credit histories. Such people did not qualify for the best interest rates; the riskiest of these borrowers were known as “subprime.” With interest rates falling nationwide, most subprime loans gave borrowers a low “teaser” rate for the first two or three years, with the monthly payments ballooning after that.

Because subprime borrowers were assumed to be higher credit risks, lenders charged them higher interest rates. That meant that investors who bought securities based on pools of subprime mortgages would enjoy higher returns.

 

Credit-rating companies, which investors relied on to gauge the risk of default, gave many of the securities high grades. So Wall Street had no shortage of customers for subprime products, including pension funds and investors in places such as Asia and the Middle East, where wealth had blossomed over the past decade. Government-chartered mortgage companies Fannie Mae andFreddie Mac, encouraged by the Bush administration to expand homeownership, also bought more pools of subprime loans.

One member of the Fed watched the developments with increasing trepidation: Edward Gramlich, a former University of Michigan economist who had been nominated to the central bank by President Bill Clinton. Gramlich would later call subprime lending “a great national experiment” in expanding homeownership.

In 2003, Gramlich invited a Chicago housing advocate for a private lunch in his Washington office. Bruce Gottschall, a 30-year industry veteran, took the opportunity to pull out a map of Chicago, showing the Fed governor which communities had been exposed to large numbers of subprime loans. Homes were going into foreclosure. Gottschall said the Fed governor already “seemed to know some of the underlying problems.”

 

Chapter III: ‘Half-truths’ and lies
The young woman who walked into Pinnacle’s Vienna office in 2004 said her boyfriend wanted to buy a house near Annapolis. He hoped to get a special kind of loan for which he didn’t have to report his income, assets or employment. Mortgage broker Connelly handed the woman a pile of paperwork.

On the day of the settlement, she arrived alone. Her boyfriend was on a business trip, she said, but she had his power of attorney. Informed that for this kind of loan he would have to sign in person, she broke into tears: Her boyfriend actually had been serving a jail term.

Not a problem. Almost anyone could borrow hundreds of thousands of dollars for a house in those wild days. Connelly agreed to send the paperwork to the courthouse where the boyfriend had a hearing. As it happened, he was freed that day. Still, Connelly said, “that was one of mine that goes down in the annals of the strange.”

Strange was becoming increasingly common: loans that required no documentation of a borrower’s income. No proof of employment. No money down. “I was truly amazed that we were able to place these loans,” Connelly said.

It was a world removed from his start in the business, in 1979, when the University of Maryland graduate joined the Springfield office of a savings and loan. For most of his 25 years in the industry, home buyers provided reams of paperwork documenting their employment, savings and income. He’d fill out the forms and send away carbon copies for approval, which could take 60 days.

Connelly was now brokering loans for Orlando-based Pinnacle or for subprime specialists such as New Century Financial that went to borrowers with poor credit history or other financial limitations. Connelly said he secured many loans for restaurant workers, including one for $500,000 for a McDonald’s employee who earned about $35,000 a year.

Lenders saw subprime loans as a safe bet. Home prices were soaring. Borrowers didn’t have to worry about their payments ballooning — they could sell their homes at any time, often at a hefty profit. Jeffrey Vratanina, one of Pinnacle’s co-founders, said Wall Street wanted to buy more and more of the mortgages, regardless of their risk, to pool them and then sell them to investors. “Quite candidly, it all boils down to one word: greed,” he said.

In the Washington area, the housing boom coincided with a surge in the immigrant population, especially Latinos in places such as Prince William County. For many of them, subprime and other unconventional loans were the only way to attain the American dream of owning a home. Pinnacle’s customers included construction workers, house cleaners and World Bankemployees, who “saw an opportunity to get into a house without putting much money on the table — to save money to buy furniture to decorate the house,” said Mariano Claudio, who in his late 20s was helping run Pinnacle’s emerging-markets division, which was dedicated to immigrants.

Pinnacle ran ads on Spanish-language television and radio, set up booths at festivals and sponsored soccer matches at George Mason University. Brokers would hold raffles for gift cards or digital music players to collect names, addresses and phone numbers. It was “a great way to assemble a database of potential clients,” Connelly said.

He said his commission and fees depended on how much work he did on the loan, a common industry practice that often led to higher charges for subprime borrowers. Connelly said he carefully reviewed fees with his customers. “The way it’s justified morally and ethically is [that] the deal requires more work for a first-time home buyer or one with inferior financial history,” Connelly said. “It’s a balancing act of morals and ethics — and the need to make a living.”

Some brokers ignored the balance. Connelly began to hear about loan officers who charged low-income borrowers fees of as much as 5 percent of the loan or got a kickback by tacking extra percentage points to the interest rate on a mortgage. “Many borrowers are overwhelmed by the sheer volume of paperwork, disclosures, etc., and they’re just not equipped to fully understand,” he said. “There were half-truths and downright lies and severe omissions.”

A mortgage lender could hire practically anybody. “It’s not rocket science,” Connelly would tell new hires, such as the busboy who quickly traded in his Toyota Tercel (value: $1,000) for a Mazda Miata sports car (value: $25,000). Pinnacle was running out of office space, forcing some loan officers to work on window ledges or out of their cars.

Then came the party at the Mayflower at the end of 2005, a celebration hosted by the emerging-markets division. In June 2003, the division had originated $500,000 in loans. By the end of 2005, it was doing $500 million with hundreds of brokers across the country.

“It built to a head,” Connelly said of the times. “You could point to the Christmas party as the pinnacle.”

Chapter IV: Warning sign
Jan. 31, 2006. Greenspan, widely celebrated for steering the economy through multiple shocks for more than 18 years, steps down from his post as Fed chairman.

Greenspan puzzled over one piece of data a Fed employee showed him in his final weeks. A trade publication reported that subprime mortgages had ballooned to 20 percent of all loans, triple the level of a few years earlier.

“I looked at the numbers . . . and said, ‘Where did they get these numbers from?’ ” Greenspan recalled in a recent interview. He was skeptical that such loans had grown in a short period “to such gargantuan proportions.”

 

Greenspan said he did not recall whether he mentioned the dramatic growth in subprime loans to his successor, Ben S. Bernanke.

Bernanke, a reserved Princeton University economist unaccustomed to the national spotlight, came in to the job wanting to reduce the role of the Fed chairman as an outsized personality the way Greenspan had been. Two weeks into the job, Bernanke testified before Congress that it was a “positive” that the nation’s homeownership rate had reached nearly 70 percent, in part because of subprime loans.

“If the housing market does slow down,” Bernanke said, “we’ll want to see how strong the subprime mortgage market is and whether or not we’ll see any problems in that market.”

Staff writers David Cho and Neil Irwin and staff researchers Richard Drezen and Rena Kirsch contributed to this report.

 

MORTGAGE MELTDOWN: LIBOR THREATENS CONFIDENCE —U.S. BANKS LYING TO THE WORLD

IF YOU ARE TAKING YOUR LENDER BANK TO COURT OR VICA VERSA, HERE IS MORE FUEL TO THROW ON THE FIRE — THEY EVEN LIED TO OTHER BANKS — INTENTIONALLY SO THEY WOULDN’T APPEAR DESPERATE FOR MONEY. 

The Mysteries of Libor

And Other Revelations…

 

THERE CAN BE NO DOUBT THAT THE FINANCIAL SYSTEM IS BASED 100% ON TRUST AND CONFIDENCE OF THE PLAYERS IN EACH OTHER. U.S. BANKS HAVE NOW TAKEN THAT OFF THE TABLE. THE EFFECTS WILL BE FAR-REACHING. 

 

By JOSEPH SCHUMAN

THE WALL STREET JOURNAL ONLINE

 

More than most financial crises of the recent past, the 2007-2008 credit crunch has exposed plumbing behind the walls of global finance, and the result is a lot of re-examination.

 

Let’s start with Libor. The London interbank offered rate, a figure drawn from dollar-lending rates among the biggest global banks, is used to set interest rates for a broad spectrum of borrowers, and it has provoked concern beyond banking circles lately thanks to some erratic movements. The Wall Street Journal decided to compare the borrowing costs reported by the 16 banks on the Libor-setting panel with a separate market that tracks the risk of lending and borrowing by these banks — the market for credit-default swaps, a form of default insurance. What the paper found is that Citigroup, UBS, J.P. Morgan Chase and some other Libor-panel members have been reporting borrowing costs that are lower than what the credit-default numbers suggest they should be. That has led Libor “to act as if the banking system was doing better than it was at critical junctures in the financial crisis,” the Journal says, which could cast doubt on the reliability of a number used to calculate home mortgages, corporate loans and a host of other borrowing around the world.

 

Some bankers have grown suspicious that rivals were low-balling their borrowing costs so they wouldn’t look desperate, and Libor’s overseer, the British Bankers’ Association, is expected to report on possible adjustments to the system tomorrow. But people familiar with the group’s deliberations tell the Journal no major changes are expected. The Libor and credit-default swaps rates have been diverging since late January, when the credit crunch was worsening and central bankers at the Federal Reserve and elsewhere started pulling out all the stops to calm the tumult. The BBA says Libor is reliable and that many financial indicators have acted funny during the crisis, while the Journal cites a number of reasons offered by analysts to explain the risk-rate disparity it finds: Lending between banks came to a halt for months amid the uncertainty, which added some guesswork to the borrowing-cost estimates; or Citigroup and others’ ability to tap their customers’ cash deposits and extra funds from the Fed could have reduced their borrowing needs.

 

Still, the Journal says, five banks in particular had wider gaps than the 11 others: Citigroup, WestLB of Germany, HBOS of Britain, J.P. Morgan Chase and Swiss lending giant UBS. And “one possible explanation for the gap is that banks understated their borrowing rates,” the paper says. “If dollar Libor is understated as much as the Journal’s analysis suggests, it would represent a roughly $45 billion break on interest payments for homeowners, companies and investors over the first four months of this year. That’s good for them, but a loss for others in the market, such as mutual funds that invest in mortgages and certain hedge funds that use derivative contracts tied to Libor.”

Foreclosure Defense: Ankle Biting from Lenders to Investment Bankers Benefits Borrowers

IT ALL COMES DOWN TO THIS: LENDERS DIDN’T CARE ABOUT THE QUALITY OF THE LOAN OR THE IMPACT ON BORROWERS OR INVESTORS (INCLUDING THEIR OWN SHAREHOLDERS). THEY WERE PREPARED TO FALSIFY ANYTHING AND USE ANY MISREPRESENTATION OR PRESSURE TACTIC THEY COULD TO GET THE LOAN SOLD AND THE BORROWER TO SIGN. THEY PRETENDED THEY HAD NO RISK BECAUSE THEY INTENDED TO DODGE THE RISK UNDER PLAUSIBLE DENIABILITY. BUT NOW ALL SIDES ARE CONVERGING ON THE LENDERS AND THE LOSSES WHICH MOUNTED IN THE INVESTMENT BANKS IS STARTING TO MOUNT IN THE BANKS THEMSELVES.

It might not seem like you should care about the woes of investors who were defrauded in much the same way as borrowers. Think Again. Our team has been assiduously researching the resources for borrowers and their attorneys to use. This site, we hope and we are told, is very helpful to attorneys and borrowers alike and lately bank executives and investors have been visiting. But remember, whether you are a borrower or an investor, you need a professional audit (See TILA AUDIT and Mortgage Audit under Foreclosure Defense links on right side of this page) done so you are not shooting blanks when you write your first demand letter or file your lawsuit. 

I have been contacted by a number of “auditing” companies that wish for us to recommend them. I would be more than happy to recommend more than the two we have here. (see links on right side of the page). But a review of the work by everyone else reveals serious deficiencies in their work and in their objectives. We also find that the fees charged by most of these start-ups or loss mitigators are too high — i.e., they are disproportionate to the relief or remedy they might achieve. In most cases all they offer, like bankruptcy attorneys is a very temporary deferral of the inevitable.

The total audit, report and recoemmnedation should consist of advising you on TILA, RESPA, RICO and the “little FTC” acts of each state. You should be seeking not merely relief on monthly payments, but refunds, damages and attorney fees if an attorney is used. You should be seeking to stop foreclosure, sale or eviction because proceedings up to this point have been procured by fraud, with the trustee or the lender misrepresenting the real parties in interest. (In legal parlance failure to include necessary and indispensable parties and lack of standing).

In most cases, the real parties in interest are multiple owners of perhaps multiple securitized instruments backed by your mortgage. And in most cases the lenders have no way of tracing the actual owners of the mortgage and note to the specific property which is encumbered by your mortgage. It is a realistic goal, even if improbable, to seek removal of the mortgage lien, release from liability on the note and to walk away with the house free and clear. 

Read carefully. These are lawsuits from investors who, as part of the deal when they bought the CDO, CMO, CLO etc., were entitled to sell the security back at full price to the lender if there was fraud, misrepresentation etc. The fraud and misrepresentation they are alleging is basically the same as the fraud and misrepresentation you, the borrower, were subjected to. Deceit and cheating were the name fo the game. Even Moody’s announced in today’s Wall Street Journal that they are cleaning house where ratings were improperly stated through “neogitation” rather than analysis. This is good stuff and you ought to get to know about it.

These are also the lawsuits of shareholders of lenders who allege that the lenders failed to disclose to the public and shareholders in particular what they were doing, what exposure they had to liabilities arising from almost certain buy-back of most of the loans they sold, many of which are averaging default rates of 30% or more.

This is all inside stuff that tells your story only from the point of view of the investor. By showing that the lenders were defrauding everyone up an down the line, you can demonstrate to a court that there was a pattern of corruption and fraud. The lenders know it and so do the investment bankers without whose help the scheme would not have worked. Settlements are the most likely way out for all concernerd. 

These lawsuits consist of allegations by INSIDERS who know the truth. The allegations verify what we have been saying in this blog for many months — that the scheme depended upon a consistent pattern of fraud, misrepresentation and plausible deniability from one end (the investor who provided the money under false pretenses, false ratings and false assurances of insurance) to the other end (the borrower who signed the mortgage documents under false pretenses, false appraisals, undisclosed lender practices, rebates to mortgage borkers, high fees — bribes — to appraisers, and title agents who turned ablind eye toward the obvious inequities of the closing).

IT ALL COMES DOWN TO THIS: LENDERS DIDN’T CARE ABOUT THE QUALITY OF THE LOAN OR THE IMPACT ON BORROWERS OR INVESTORS (INCLUDING THEIR OWN SHAREHOLDERS). THEY WERE PREPARED TO FALSIFY ANYTHING AND USE ANY MISREPRESENTATION OR PRESSURE TACTIC THEY COULD TO GET THE LOAN SOLD AND THE BORROWER TO SIGN. THEY PRETENDED THEY HAD NO RISK BECAUSE THEY INTENDED TO DODGE THE RISK UNDER PLAUSIBLE DENIABILITY. BUT NOW ALL SIDES ARE CONVERGING ON THE LENDERS AND THE LOSSES WHICH MOUNTED IN THE INVESTMENT BANKS IS STARTING TO MOUNT IN THE BANKS THEMSELVES.

Investors Press Lenders on Bad Loans

Buyers Seek to Force Repurchase by Banks; 
Potential Liability Could Reach Billions
By RUTH SIMON
May 28, 2008; Page C1

Already burned by bad mortgages on their books, lenders now are feeling rising heat from loans they sold to investors.

Unhappy buyers of subprime mortgages, home-equity loans and other real-estate loans are trying to force banks and mortgage companies to repurchase a growing pile of troubled loans. The pressure is the result of provisions in many loan sales that require lenders to take back loans that default unusually fast or contained mistakes or fraud.

[Chart]

The potential liability from the growing number of disputed loans could reach billions of dollars, says Paul J. Miller Jr., an analyst with Friedman, Billings, Ramsey & Co. Some major lenders are setting aside large reserves to cover potential repurchases.

Countrywide Financial Corp., the largest mortgage lender in the U.S., said in a securities filing this month that its estimated liability for such claims climbed to $935 million as of March 31 from $365 million a year earlier. Countrywide also took a first-quarter charge of $133 million for claims that already have been paid.

The fight over mortgages that lenders thought they had largely offloaded is another reminder of the deterioration of lending standards that helped contribute to the worst housing bust in decades.

Such disputes began to emerge publicly in 2006 as large numbers of subprime mortgages began going bad shortly after origination. In recent months, these skirmishes have expanded to include home-equity loans and mortgages made to borrowers with relatively good credit, as well as subprime loans that went bad after borrowers made several payments.

Many recent loan disputes involve allegations of bogus appraisals, inflated borrower incomes and other misrepresentations made at the time the loans were originated. Some of the disputes are spilling into the courtroom, and the potential liability is likely to hang over lenders for years.

Repurchase demands are coming from a wide variety of loan buyers. In a recent conference call with analysts, Fannie Mae said it is reviewing every loan that defaults — and seeking to force lenders to buy back loans that failed to meet promised quality standards. Freddie Mac also has seen an increase in such claims, a spokeswoman says, adding that most are resolved easily.

Many of the repurchase requests involve errors in judgment or underwriting rather than outright fraud, says Morgan Snyder, a consultant in Fairfax, Va., who works with lenders.

Additional pressure is coming from bond insurers such as Ambac Financial Group Inc. and MBIAInc., which guaranteed investment-grade securities backed by pools of home-equity loans and lines of credit. In January, Armonk, N.Y.-based MBIA began working with forensic experts to scrutinize pools it insured that contained home-equity loans and credit lines to borrowers with good credit. “There are a significant number of loans that should not have been in these pools to begin with,” says Mitch Sonkin, MBIA’s head of insured portfolio management.

Ambac is analyzing 17 home-equity-loan deals to see whether it has grounds to demand that banks repurchase loans in those pools, according to an Ambac spokeswoman.

Redwood Trust Inc., a mortgage real-estate investment trust in Mill Valley, Calif., said in a recent securities filing that it plans to pursue mortgage originators and others “to the extent it is appropriate to do so” in an effort to reduce credit losses.

Repurchase claims often are resolved by negotiation or through arbitration, but a growing number of disputes are ending up in court. Since the start of 2007, roughly 20 such lawsuits involving repurchase requests of $4 million or more have been filed in federal courts, according to Navigant Consulting, a management and litigation consulting firm. The figures don’t include claims filed in state courts and smaller disputes involving a single loan or a handful of mortgages.

In a lawsuit filed in December in Superior Court in Los Angeles, units of PMI Group Inc. alleged that WMC Mortgage Corp. breached the “representations and warranties” it made for a pool of subprime loans that were insured by PMI in 2007. Within eight months, the delinquency rate for the pool of loans had climbed to 30%, according to the suit. The suit also alleges that detailed scrutiny of 120 loans that PMI asked WMC to repurchase found evidence of “fraud, errors [and] misrepresentations.”

PMI wants WMC, which was General Electric Co.’s subprime-mortgage unit, to buy back the loans or pay damages. Both companies declined to comment on the pending suit.

Lenders may feel pressure to boost reserves for such claims because of the fear they could be sued for not properly accounting for potential repurchases, says Laurence Platt, an attorney in Washington. At least three lawsuits have been filed by investors who allege that New Century Financial Corp. and other mortgage lenders understated their repurchase reserves, according to Navigant.

–James R. Hagerty contributed to this article.

Write to Ruth Simon at ruth.simon@wsj.com

Mortgage Meltdown Recovery: Economics, Waste, Imbalance, and Unbalanced Economists

ECONOMICS: How Economists downplay substitution on the supply side, and discount American Innovation, American Ingenuity and American Temerity. Bad policy from flawed measurements. Flawed Measurements from biased, agenda-based ideology.

“The central problem confronting the new President is not the political issues of conflicting ideology nor the “choices” presented by well-intentioned economists; the real issue is leadership in seeing what economists call “waste” and imbalance” as opportunity.”

Empty steel and auto-making plants have an unequalled opportunity of leveraging an existing infrastructure to manufacture wind generators, new concept products and most importantly cars that are far ahead of the curve and exactly what consumers want.

Phoenix Motors Cars and other new entrants into the race for longer range high speed all-electric vehicles that can be recharged in minutes on the road, or with a few solar panels during the day at home have taken the ultimate risk and ultimate plunge and are doing very well in their development stage vehicles.

Too much wheat? Create incentives to find other uses. Of course we can help feed the world, but there are hundreds of other uses to produce energy, manufacture goods, create new products for building materials and dozens of possibilities that are probably lingering in the heads of some farmers right now. Those expensive subsidies could be turning a profit for government and farmers and provide an opportunity for small farmers to make money no matter how much surplus wheat is grown.

Subsidies: Whether it is for individuals going through rough times, businesses going through rough times, businesses being incentivized, there is an important element of risk that is being reduced for the recipients. This reduction of risk is worth a great deal of “value” to the recipients. What are they paying for it? If it is individual there are all kinds of community service that can be worked into almost anyone’s schedule. If it is a business, this value can be passed on to consumers in reduced prices or greater benefits. The point here is not to prescribe specific methods of payments but only to say that ANYONE who gets a benefit from the government should be paying for it through taxes, giving back to the community or providing financial or non-financial benefits to the marketplace and society. 

That corn is being diverted to production of ethanol is a political pandering of the worst sort. What politicians and economists have both missed completely is not just that there are much better energy efficient alternative products from which to refine ethanol (cane sugar, cellulose, wheat etc) but that since we are able to produce so much corn, we can lower its price, keep the farmers happy and substitute uses such that farmers are making a good rate of return on VOLUME.  This brings down food costs which increase the opportunities for consumers to pay their bills, save money and thus provide the capital that is currently being “borrowed” from other countries by issuance of increasingly worthless American paper, once called money.

Economists fail to recognize on the supply side that certain substitutions will routinely provide segments or tranches of demand for products wherein the exchange value might be low but the use value may be high. Taken collectively, this represents opportunity for even the smallest farmers and manufacturers.

Corn is a bastardized example of this process and a poor model, mostly because business schools, media and modern economists are not teaching substitution as a general application. They teach substitution only on the demand side where the inventiveness of the American consumer to adapt to changing quality and prices is assumed but the ingenuity and inventiveness of the American producer is dismissed.

Too much interest expense? This curse dating back to the early 1970’s has robbed the country and its citizens of much needed capital for savings, investment and consumption of goods and services that drive our economy. Government’s complicity in making legal (usurious rates and fees) what was always illegal and even criminal needs reversal.

Current plans to reduce mortgage payments and mortgage interest to the teaser rates that were forced down the throats of unsuspecting borrowers using the money from unsuspecting investors, reducing credit card interest and fees, banning payday loans that roll over into 450% loans etc.,. are all steps in the right direction of redirecting capital to where it needs to go without robbing the capitalists from receiving a fair return.

Reasonable minds may differ but they can come to agreement on a fair rate of return which maintains financial market liqudiidty without windfall profits to credit card issuers, payday lenders, oil companies, health-care, health insurance and drug companies.

These are the things that central bankers and investors around the world are watching and waiting for and it is only through aggressive innovation, which requires aggressive, innovative education techniques, that good old American ingenuity will once again save the day and the dollar.

Foreclosure Defense and Mortgage Meltdown: Worse than you think

Take a look at the article (link below) which highlights the essential issues. It’s a bit choppy in reading but it makes the points you should consider as you plan your strategy for dealing with life over the next 10 years.

Despite assurances from the administration and those on Wall Street who are trying to bolster confidence in U.S. financial markets, the trust level between bankers, the key indicator of our economic future, has never been lower. Even Libor which is the holy grail of indexes has been manipulated during the last 4 years. Moody’s admitted yesterday that a computer “mistake” caused it to miss the “downturn” in the value  and rating of certain securities — the very same ones they overrated in the first place because the analysts were literally given fishing trips and pressured from the top to keep the “client” through “negotiation” of the rating that Moody’s would apply. 

What you have is a picture of obfuscation.

Imagine on the right side,  an opaque cloud of misrepresentations, ratings and false insurance protection on a securities that are so complex the number of variables rose to as high as 125 and it took a modern computer an entire weekend to come up with a price that, like election results from an entirely electronic system, cannot be audited for integrity or credibility.

  • Imagine the AAA ratings that investors believed, because the rating agencies were reasonably trustworthy and accurate in the past. Imagine insurers putting their stamp of approval based upon negotiation and the false credit ratings. 
  • And know that the entire class of securities that are “asset-backed” consists of extremely high risk predatory lending practices including but not limited to originating loans to people with interest only negative amortization for sometimes over a million dollars where the borrower is out of work and disabled.
  • These are the “cash equivalent” securities that unsuspecting managers of pension funds, government funds, mutual funds, hedge funds and others were buying. 
  • Imagine them buying derivatives on derivatives thinking they were hedging their losses when in fact they were multiplying them.
  • And now imagine that investors bought $62 trillion dollars (yes that IS the figure — 4 times our GDP) of this garbage backed by unpayable mortgages, auto loans, credit cards, student loans, and other consumer and small business debt.

Now on the left side imagine the same kind of opaque cloud of misrepresentations, pressure tactics to close, and outright fraudulent misrepresentation of “appraised” value (just like the rating agencies on securities), only less regulated and more decentralized). A subsequent TILA audit reflects the following facts:

  • Imagine a person who speaks no English, or a person who is totally unsophisticated in finance.
  • A builder with a criminal record makes deals with people at the local fronts for bigger players like Countrywide, Barclays, Wells Fargo etc. The people at these front organizations are now in prison, fired or both — a very typical story.
  • The builder finds our unsuspecting buyer and tells them that for only $2,000 per month they can get a 5 acre piece of land and build a $400,000 house on it. 
  • He gets them to pony up all the money they have — $250,000.
  • They even pony up another $150,000 borrowed from the trust fund for their disabled child, injured in an accident. Nobody cares about the personal stories here because they were all out to make a buck.
  • When the prospective borrowers start asking questions about how this could possibly work they are told: “Look, it is true you are not making the whole payment. But the way things work, housing prices always go up and down the road you either refinance and get money out of the house or you can sell at a handsome profit. Housing prices have never been steadier, growth is enormous. The lender has approved this and you know it is their money they are risking and they know a lot more then either of us, so if they are willing to take the risk, why wouldn’t you?”
  • NOT DISCLOSED: (1) the lender had no stake in the outcome of the loan except to close it and collect pass through fees. (2) The mortgage and note and servicing rights were all transferred around to mortgage aggregators, and investment banks who in turn sold derivative securities based upon this garbage loan. (3) Thus the lender was not taking on a risk and neither was anyone who handled this hot potato until it landed in the hands of an unsuspecting investor. (4) And the appraiser, eager to do more appraisals and earn more fees is allowed to know the amount of the mortgage and the contract price and conveniently and always comes in with an appraisal a few percentage points higher than the contract, so it looks good to the borrowers, and even to auditors at least at the beginning of this wild free money lending cycle. Unknown tot he borrower the “bank” is actually an unscrupulous mortgage broker steering the borrower to the worst possible deal because it nets him the highest fees, and submitting falsified income information sometimes without even the knowledge of the borrower, and sometimes with a statement to the borrower (“don’t worry” this is a no-doc loan, nothing will be checked and you won’t get into trouble because everyone wants this loan to close. (the only true statement in the entire affair). 
  • LATER THE LENDER WILL TAKE THE POSITION WITH THE FBI AND OTHER LAW ENFORCEMENT THAT IT WAS DEFRAUDED EVEN THOUGH IT DEFRAUDED ITSELF” BY HAVING ITS OWN AGENTS FALSIFY THE INCOME AND APPRAISAL INFORMATION.

NOW IMAGINE BETWEEN THE OPAQUE CLOUD ON THE LEFT (defrauding the borrower) AND THE OPAQUE CLOUD ON THE RIGHT (defrauding the investor) GOSSAMER THREADS REPRESENTING PLAUSIBLE DENIABILITY. All the people that were represented as principals and were in fact just sales people earning a commission on a sale. 

With nobody at risk but the least suspecting people who heard and read representations that were outright lies, misleading or only partial truths, lending standards when down the toilet. Nobody cared or had a stake in the outcome of the loan transaction except the borrower and the investor. The name of the game was “close as many loans as possible” because these investors are being offered just enough yield to be a little higher than other investments and were convinced by fraud that the perceived risk was much lower than the actual risk — after all Moody’s rated it AAA. 

The standard relationship between borrower and lender in which BOTH had  stake in a successful transaction was gone, but the borrower didn’t know it. How many people would have closed on their loans if they had known the truth? How many people would have bought these securities if they had known the truth. The answer is that the mortgage meltdown and general credit crisis would never have happened. Inflation would not be rising out of control.

Confidence in the the U.S. dollar and U.S. financial markets would not have sunk below zero. Borrowers and investors would still have their money and their lives and their credit ratings. Money managers would still have their jobs and the performance of the funds they managed would still be within acceptable bounds. And banks and investment banks would not be threatened with failure.

1,300,000 people would not be in foreclosure and 9 million people would not be “upside down” on the equity-loan ratio of their homes. 

Now  you can read the article I found on op-ed.

http://www.opednews.com/articles/1/opedne_stephen__080522__22immoral_hazard_22.htm

Inflation: TILA-based Foreclosure Defense Key to Staunching the Bloodflow

Despite all efforts to conceal the pernicious effects of inflation and the rising tide of credit warning signals, it is now crystal clear that the underlying inflation rate in the United States is over 15% while the dollar declines in value at about the same rate. This double whammy is showing up in our pocketbooks, the gas pumps, the grocery stores and other retail stores. Americans are no loner the consumer of last resort for the world because they are out of money and out of credit. 

The cause was triggered by the Mortgage Meltdown. But the ripple effects are far more reaching than the housing sector. $500 trillion in derivatives have been planted in the marketplace and many of them are at risk. Even the ones that are not at conventional risk are still at risk because of currency exchange values. The articles written about turning the corner are way too premature.

With a fairly good-looking bill to help the housing sector meandering its way through congress, and the likelihood that the stuff will hit the fan before anything meaningful is done out of Washington, it is up to individuals to find their own ways to game the system, stop the foreclosures, sales and evictions and pivot back on the lenders, mortgage brokers, appraisers, investment bankers et al to get the money that was promised to them through fraudulent closings using hyper-inflated “market” values. 

The existing laws on the books are enough to help you if you use them. Start with the Truth in Lending Act (TILA) and get a TILA audit from people who know what they are doing. TILA is very heavily weighted in favor of consumers and borrowers. It just has not been used much until now. It can be used with mortgage loans, student loans, credit cards and all kinds of other debt, secured and unsecured. One little mistake by the lender either in assessing your ability to pay or in the disclosures made to you entitles you to relief beyond your imagination. It’s already there — USE IT!

And your efforts, combined with millions of other people (like the 9 million who now have negative equity in their homes) will force both government and the financial sector to come to the table, hat in hand, pleading for mercy. But you have to be resolute and willing to go after them. And you have to change your perception of them as the the big guys who cannot be defeated. They can be and in fact they already are defeated. All you have to do is pick up the pieces, which means reducing the mortgage on your home, getting refunds of all the interest you paid, getting refunds on the closing points and closing costs, etc. It means receiving payment for damages caused by the fraud and quite possibly a recovery or partial recovery of the expenses you pay to lawyers and experts to get you there. 

ECONOMIC REPORT
Producer prices rise tame 0.2% in April
Core PPI surprises with 0.4% gain in April and is up 3% in past year
WASHINGTON (MarketWatch) – Wholesale prices rose a smaller-than-expected 0.2% in April after seasonable adjustments, with food prices flat and energy prices falling, the Labor Department reported Tuesday.
The producer price index has risen 6.5% in the past year, the government said.
The core PPI – which excludes food and energy prices – rose 0.4% in April, more than expected. Core prices are up 3% in the past year, the biggest year-over-year rise since late 1991.
The PPI had risen 1.1% in March. Read the full report.
Economists surveyed by MarketWatch expected a 0.4% rise in the headline PPI and a 0.2% gain in the core rate.See Economic Calendar.
The PPI figures are likely to have a muted effect on markets, because they came in after the consumer price index was released last week. And, to be blunt, markets don’t seem to trust the government’s inflation figures that show falling energy prices in a world of record crude oil prices.
The government’s data are seasonally adjusted to hide the impact of normal seasonal variations to focus on fundamental changes in prices that are not driven by the ebbs and flows of the seasons. Because energy prices typically rise more in April than they did this year, the seasonally adjusted figures showed a 0.2% decline. In unadjusted terms, energy prices rose 2.9%.
Wholesale gasoline prices fell 4.6% in seasonally adjusted terms, but rose 3.2% in unadjusted terms.
The opposite case was seen in food prices. In seasonally adjusted terms, food prices were flat. But in unadjusted terms, prices fell 0.3%.
Over the course of a year, the seasonal issues balance out.
In April, core prices at the finished level were pushed higher by a 1.3% increase in wholesale light truck prices and a 0.4% increase in wholesale car prices. Commercial furniture prices rose 1.8%, the most in 27 years. Drug prices rose 0.7%. Alcohol prices rose 1%. Capital goods prices rose 0.4%.
Higher seasonally adjusted prices were seen further back in the production pipeline as well.
Prices of intermediate goods destined for further processing rose 0.9%, led by energy goods, chemicals and steel. Intermediate food prices fell 0.6%, including the biggest drop in flour prices in 33 years.
The core intermediate PPI — a key leading indicator of inflation — rose 1.2% in April and is up 5.8% in the past year, the biggest rise in nearly two years.
Prices of crude materials rose 3.2%, including a 4.1% rise in crude energy goods. Crude petroleum prices rose 4.5% and natural gas prices rose 4.3%. The core crude PPI rose 7.9%, behind a 32% rise in iron and steel scrap prices.
Crude food prices fell 0.9%, including a record 23% drop in wheat prices. End of Story
Rex Nutting is Washington bureau chief of MarketWatch

Mortgage Meltdown: Central Bankers Prepare for Collapse of Dollar

That confidence in the U.S. dollar is at an all-time low is no surprise. But when countries start propping up currencies that are barely on the radar, you know that central bankers are thinking that the U.S. government is not doing enough to shore up the fundamentals of its economy. This translates to a lack of confidence that the dollar will recover. Like the price of oil headed inexorably toward $200 per barrel, the dollar is seen headed inexorably downward. This kind of thinking leads to self-fulfilling prophecy, so it needs to be taken seriously. 

The plain fact is that we have $500 trillion in derivative securities that are treated, for the most part, as cash equivalents. In the face of a half-gig behemoth of private sector money supply, central bankers understand that their impact on monetary policy, money supply, credit, and economic growth is virtually out of reach. Like it or not, economic policy is in the hands of the private sector now.

More pretense of regulation from a corrupt government will produce less rather than more instability in the financial sector. Government is providing cover for wrongdoers rather than relief for everyone. 

The dangers are obvious. The inevitable conclusion of this paradigm shift can already be seen: a massive shift in the distribution of wealth, with its attendant death grip on government policy and action.

The role of government — to be the referee in assuring a fair playing field — has been subverted beyond recognition.

The tangible results are that millions of homes are being foreclosed, tens of millions of people are being hit with economic losses, and despite even the calls of the conservative Economist magazine for a U.S. “Federal effort to streamline the states’ convoluted foreclosure laws” nothing has emerged thus far.

We are aware and I have assisted in the writing of emergency rules of civil procedure for foreclosures from initiation of proceedings through mediation and judgment. These rules have been submitted to Nevada, Florida and Arizona thus far. The Courts are warming to the idea, but it is likely that a uniform approach will not be adopted, leaving the country in a morass of hoops to jump through before borrowers and lenders and investors can be brought to the table to put a stop to the downward slide. 

Under normal conditions, we would be the first to scream for better regulation, more enforcement and criminal prosecution arising from the massive fraud that killed the residential housing market, and severely damaged the rest of the credit markets worldwide. But we are of the opinion that this is an emergency that transcends normal government response. It is akin to the emergency of war where we are fighting for our very survival. Amnesty for every participant on the investor-lender side and on the borrower loan origination side is essential even if it gives a break to “speculators” and criminal minds that irresponsibly launched this plan to nowhere.

Only then will we demonstrate to central bankers around the world that we are serious about this crisis. Only then will they lose momentum is distancing themselves from the dollar.

Overseas banks save a currency
Commentary: A useful game plan if the dollar really hits the skids
LONDON (MarketWatch) – It’s official — overseas central banks stepped in Friday to prop up a beleaguered currency that’s been weighed down by an out-of-control financial sector and an economy on the rocks.
Sounds like the U.S. dollar, but actually, it’s the Iceland krona. See related story.
The central banks of Norway, Sweden and Denmark will each provide up to 500 million euros that the Central Bank of Iceland can swap for krona.
Of course, any central bank intervention to prop up the dollar would have to be done on a far larger scale than chucking in a bit more than $2 billion.
So understandably, the Bank of Japan and the European Central Bank reportedly have kept their ammunition so far to words and arm twisting. See related story.
And U.S. interest rates are just a touch lower than what’s on offer in Iceland — 2.25% compared to 15.5%.
But it’s worth noting that the intervention has worked, on the day at least – the currency is up over 4% against the euro.
If nothing else, the move by the Scandinavian central banks is a game plan that can be dusted off if the dollar really goes into meltdown mode.

Mortgage Meltdown: The High Cost of Racism

There are lots of things we do as human beings that are counterproductive in the sense of preventing ourselves from getting what we want. One of them is racism. Whether you harbor some small or large negative feeling toward one race or another consider this:

Negative red lining: In order to carry off the largest economic scam in history, bankers and Wall Street had to find a population that was deprived of sufficient education to know about the world, to know how to conduct their affairs legally, and to be able to reason things so they could make an informed decision. 

It was obvious where they were going to find this demographic: (1) people who spoke no English and (2) black people, especially from the deep South. They were perfect targets and it all went “swimmingly” with everybody touting their new equity in their modest homes as though they were watching the ticker on the New York Stock Exchange.

People refinanced to take more money out of their house like an ATM machine, and they spent the money. But the value wasn’t really there, and neither is the income for original targets and then the secondary “refi” targets who got caught up in the whole frenzy. And now millions of lives are being uprooted, millions of jobs are being lost, and millions of people are stuck in retirement with insufficient income because of failed investments by their pension funds, their mutual funds et al..

You see, it is the poor in our country who are exposed, who are vulnerable. They are the ones that predators attack with tactics they could never get away with elsewhere. But the effects, if the predators succeed on a large scale, are felt by everyone. And they are felt deeply.

And the income isn’t there either for all the individuals, institutions, banks, government entities, corporations and other invetors who bought mortgage backed securities that were, for the most part, not worth the paper they were written on.

And the income isn’t there for people who earn a living wage but now find that it isn’t a living anymore because the value of the dollars they earn is also not worth the paper it is written on.

And so when these poor people protest that they were treated unfairly, the racist in us tends to turn a less sympathetic ear to them than to someone “like us.” That is where racism costs us.

By waiting for the shoe to drop on us instead of protecting those who could not protect themselves, by depriving people of the education they need to be able to avoid these predators, we have now created the worst possible outcome: nobody in the entire world trusts the United States policy on money and finance. And we lost our moral high ground to influence the policies of other nations. 

And the benefits that we have long expected from our dominance of world finance is fast vanishing as the dollars we issued have turned into vast sweeping IOU’s to countries we could not imagine would have such power over us — China, S. Korea etc.

That Obama has come this far is amazing, even astonishing. Especially in view of the secrets we harbor, the driftwood of hundreds of years of shameful history and rationalization of that history. Notwithstanding all we have learned there are many among us who do not understand that we are wasting precious time and human resources when we withhold empathy, when we withhold funding for education, when we flee from those who are different.

How much money has been lost in home equity due to white flight? It was whites that lost the equity!

How much time and productivity did the South lose because they refused to allow blacks to participate in their economy or in education — even right after the civil war when it was ONLY the blacks that knew how to run the farms and plantations. 

How much innovation did we lose by red lining employment opportunities in the North?

How many Einsteins have we completely missed amongst the black and Latin populations?

 

Racist Incidents Give Some Obama Campaigners Pause
By Kevin Merida
Washington Post Staff Writer
Tuesday, May 13, 2008; A01

 

Danielle Ross was alone in an empty room at the Obama campaign headquarters in Kokomo, Ind., a cellphone in one hand, a voter call list in the other. She was stretched out on the carpeted floor wearing laceless sky-blue Converses, stories from the trail on her mind. It was the day before Indiana’s primary, and she had just been chased by dogs while canvassing in a Kokomo suburb. But that was not the worst thing to occur since she postponed her sophomore year atMiddle Tennessee State University, in part to hopscotch America stumping for Barack Obama.

Here’s the worst: In Muncie, a factory town in the east-central part of Indiana, Ross and her cohorts were soliciting support for Obama at malls, on street corners and in a Wal-Mart parking lot, and they ran into “a horrible response,” as Ross put it, a level of anti-black sentiment that none of them had anticipated.

“The first person I encountered was like, ‘I’ll never vote for a black person,’ ” recalled Ross, who is white and just turned 20. “People just weren’t receptive.”

For all the hope and excitement Obama’s candidacy is generating, some of his field workers, phone-bank volunteers and campaign surrogates are encountering a raw racism and hostility that have gone largely unnoticed — and unreported — this election season. Doors have been slammed in their faces. They’ve been called racially derogatory names (including the white volunteers). And they’ve endured malicious rants and ugly stereotyping from people who can’t fathom that the senator from Illinois could become the first African American president.

The contrast between the large, adoring crowds Obama draws at public events and the gritty street-level work to win votes is stark. The candidate is largely insulated from the mean-spiritedness that some of his foot soldiers deal with away from the media spotlight.

Victoria Switzer, a retired social studies teacher, was on phone-bank duty one night during the Pennsylvania primary campaign. One night was all she could take: “It wasn’t pretty.” She made 60 calls to prospective voters in Susquehanna County, her home county, which is 98 percent white. The responses were dispiriting. One caller, Switzer remembers, said he couldn’t possibly vote for Obama and concluded: “Hang that darky from a tree!”

Documentary filmmaker Rory Kennedy, the daughter of the late Robert F. Kennedy, said she, too, came across “a lot of racism” when campaigning for Obama in Pennsylvania. One Pittsburgh union organizer told her he would not vote for Obama because he is black, and a white voter, she said, offered this frank reason for not backing Obama: “White people look out for white people, and black people look out for black people.”

Obama campaign officials say such incidents are isolated, that the experience of most volunteers and staffers has been overwhelmingly positive.

The campaign released this statement in response to questions about encounters with racism: “After campaigning for 15 months in nearly all 50 states, Barack Obama and our entire campaign have been nothing but impressed and encouraged by the core decency, kindness, and generosity of Americans from all walks of life. The last year has only reinforced Senator Obama’s view that this country is not as divided as our politics suggest.”

Campaign field work can be an exercise in confronting the fears, anxieties and prejudices of voters. Veterans of the civil rights movement know what this feels like, as do those who have been involved in battles over busing, immigration or abortion. But through the Obama campaign, some young people are having their first experience joining a cause and meeting cruel reaction.

On Election Day in Kokomo, a group of black high school students were holding up Obama signs along U.S. 31, a major thoroughfare. As drivers cruised by, a number of them rolled down their windows and yelled out a common racial slur for African Americans, according to Obama campaign staffers.

Frederick Murrell, a black Kokomo High School senior, was not there but heard what happened. He was more disappointed than surprised. During his own canvassing for Obama, Murrell said, he had “a lot of doors slammed” in his face. But taunting teenagers on a busy commercial strip in broad daylight? “I was very shocked at first,” Murrell said. “Then again, I wasn’t, because we have a lot of racism here.”

The bigotry has gone beyond words. In Vincennes, the Obama campaign office was vandalized at 2 a.m. on the eve of the primary, according to police. A large plate-glass window was smashed, an American flag stolen. Other windows were spray-painted with references to Obama’s controversial former pastor, the Rev. Jeremiah Wright, and other political messages: “Hamas votes BHO” and “We don’t cling to guns or religion. Goddamn Wright.”

Ray McCormick was notified of the incident at about 2:45 a.m. A farmer and conservationist, McCormick had erected a giant billboard on a major highway on behalf of Farmers for Obama. He also was housing the Obama campaign worker manning the office. When McCormick arrived at the office, about two hours before he was due out of bed to plant corn, he grabbed his camera and wanted to alert the media. “I thought, this is a big deal.” But he was told Obama campaign officials didn’t want to make a big deal of the incident. McCormick took photos anyway and distributed some.

“The pictures represent what we are breaking through and overcoming,” he said. As McCormick, who is white, sees it, Obama is succeeding despite these incidents. Later, there would be bomb threats to three Obama campaign offices in Indiana, including the one in Vincennes, according to campaign sources.

Obama has not spoken much about racism during this campaign. He has sought to emphasize connections among Americans rather than divisions. He shrugged off safety concerns that led to early Secret Service protection and has told black senior citizens who worry that racists will do him harm: Don’t fret. Earlier in the campaign, a 68-year-old woman in Carson City, Nev., voiced concern that the country was not ready to elect an African American president.

“Will there be some folks who probably won’t vote for me because I am black? Of course,” Obama said, “just like there may be somebody who won’t vote for Hillary because she’s a woman or wouldn’t vote for John Edwards because they don’t like his accent. But the question is, ‘Can we get a majority of the American people to give us a fair hearing?’ ”

Obama has won 30 of 50 Democratic contests so far, the kind of nationwide electoral triumph no black candidate has ever realized. That he is on the brink of capturing the Democratic nomination, some say, is a testament to how far the country has progressed in overcoming racism and evidence of Obama’s skill at bridging divides.

Obama has won five of 12 primaries in which black voters made up less than 10 percent of the electorate, and caucuses in states such as Idaho and Wyoming that are overwhelmingly white. But exit polls show he has struggled to attract white voters who didn’t attend college and earn less than $50,000 a year. Today, he and Hillary Clinton square off in West Virginia, a state where she is favored and where the votes of working-class whites will again be closely watched.

For the most part, Obama campaign workers say, the 2008 election cycle has been exhilarating. On the ground, the Obama campaign is being driven by youngsters, many of whom are imbued with an optimism undeterred by racial intolerance. “We’ve grown up in a different world,” says Danielle Ross. Field offices are staffed by 20-somethings who hold positions — state director, regional field director, field organizer — that are typically off limits to newcomers to presidential politics.

Gillian Bergeron, 23, was in charge of a five-county regional operation in northeastern Pennsylvania. The oldest member of her team was 27. At Scranton’s annual Saint Patrick’s Day parade, some of the green Obama signs distributed by staffers were burned along the parade route. That was the first signal that this wasn’t exactly Obama country. There would be others.

In a letter to the editor published in a local paper, Tunkhannock Borough Mayor Norm Ball explained his support of Hillary Clinton this way: “Barack Hussein Obama and all of his talk will do nothing for our country. There is so much that people don’t know about his upbringing in the Muslim world. His stepfather was a radical Muslim and the ranting of his minister against the white America, you can’t convince me that some of that didn’t rub off on him.

“No, I want a president that will salute our flag, and put their hand on the Bible when they take the oath of office.”

Obama’s campaign workers have grown wearily accustomed to the lies about the candidate’s supposed radical Muslim ties and lack of patriotism. But they are sometimes astonished when public officials such as Ball or others representing the campaign of their opponent traffic in these falsehoods.

Karen Seifert, a volunteer from New York, was outside of the largest polling location in Lackawanna County, Pa., on primary day when she was pressed by a Clinton volunteer to explain her backing of Obama. “I trust him,” Seifert replied. According to Seifert, the woman pointed to Obama’s face on Seifert’s T-shirt and said: “He’s a half-breed and he’s a Muslim. How can you trust that?”

* * *

Pollsters have found it difficult to accurately measure racial attitudes, as some voters are unwilling to acknowledge the role that race plays in their thinking. But some are not. Susan Dzimian, a Clinton supporter who owns residential properties, said outside a polling location in Kokomo that race was a factor in how she viewed Obama. “I think if it was somebody other than him, I’d accept it,” she said of a black candidate. “If Colin Powell had run, I would be willing to accept him.”

The previous evening, Dondra Ewing was driving the neighborhoods of Kokomo, looking to turn around voters like Dzimian. Ewing, 47, is a chain-smoking middle school guidance counselor, a black single mother of two and one of the most fiercely vigilant Obama volunteers in Kokomo, which was once a Ku Klux Klan stronghold. On July 4, 1923, Kokomo hosted the largest Klan gathering in history — an estimated 200,000 followers flocked to a local park. But these are not the 1920s, and Ewing believes she can persuade anybody to back Obama. Her mother, after all, was the first African American elected at-large to the school board in a community that is 10 percent black.

Kokomo, population 46,000, is another hard-hit Midwestern industrial town stung by layoffs. Longtimers wistfully remember the glory years of Continental Steel and speak mournfully about the jobs shipped overseas. Kokomo Sanitary Pottery, which made bathroom sinks and toilets, shut down a couple of months ago and took with it 150 jobs.

Aaron Roe, 23, was mowing lawns at a local cemetery recently, lamenting his $8-an-hour job with no benefits. He had earned a community college degree as an industrial electrician, but learned there was no electrical work to be found for someone with his experience, which is to say none. Politics wasn’t on his mind; frustration was. If he were to vote, it would not be for Obama, he said. “I just got a funny feeling about him,” Roe said, a feeling he couldn’t specify, except to say race wasn’t a part of it. “Race ain’t nothing,” said Roe, who is white. “It’s how they’re going to help the country.”

The Aaron Roes are exactly who Dondra Ewing was after: people with funny feelings.

At the Bradford Run Apartments, she found Robert Cox, a retiree who spent 30 years working for an electronics manufacturer making computer chips. He was in his suspenders, grilling shish kebab, which he had never eaten. “Something new,” Cox said, recommended by his son who was visiting from Colorado.

Ewing was selling him hard on Obama. “There are more than two families that can run the United States of America,” she said, “and their names aren’t Bush and Clinton.”

“Yeah, I know, I know,” Cox said, remaining noncommittal.

He opened the grill and peeked at the kebabs. “It’s not his race, because I got real good friends and all that,” Cox continued. “If anything would keep him from getting elected, it would be his name. It might turn off some older people.”

Like him?

“No, older than me,” said Cox, 66.

Ewing kept talking, until finally Cox said, “Probably Obama,” when asked directly how he would vote.

As she walked away, Ewing said: “I think we got him.”

But truthfully, she wasn’t feeling so sure.

Staff writer Peter Slevin and polling analyst Jennifer Agiesta contributed to this report.

Mortgage Meltdown: Credit Crisis Spreads

 

Credit Crisis Over? — Not by a Long Shot

 

As you can imagine I get emails and comments from hundreds of people seeking help and whose houses are going into sale or foreclosure, most of whom are completely unaware that they have rights superior to the lender, if they can find someone to help them like www.repairyourloan.com

 

Lawyers won’t help you until you get the mortgage audit completed. It is then that you will know the extent of your claims and what you do to stop the foreclosure, the eviction or even extinguish the mortgage and release yourself from liability on the mortgage note. 

 

Here is an article which illustrates why you need to beware of both the government and the lenders. They are trying to give the impression that the credit crisis is (a) not as bad as people thought and (b) over. What they are really trying to do is pivot your attention away from the fact that the massive mortgage meltdown has caused a meltdown in all the credit markets. It has caused a massive meltdown in asset values for individuals, corporations and government entities. 

 

This is not the beginning of the end. It is, as Winston Churchill said in World War II “the end of the beginning.” We have years to go before this shakes out just in terms of education of the public. And we have decades to go to recover from this utter failure of government to do its job — to referee between those who know things and those who don’t. 

 

In the process the government, the corporations and the individuals owning houses or doing their jobs have all been smacked in the face, really hard and have snapped out of their wishful confidence in their government and in the “good faith” of a good faith estimate before closing on a loan.

 

Credit Crisis

Congress And The Credit Crisis

Joshua Zumbrun 05.14.08, 6:00 AM ET

 

Washington, D.C. – 

A congressional panel meets Tuesday morning looking to answer two big questions about the economy: Is the credit crisis over? And can anything be done to prevent another crisis in the future? 

 

To both questions, the answer is “No. And proceed with great caution.”

 

For the credit crisis, reasons for optimism are emerging. Monday morning, Federal Reserve Chairman Ben Bernanke outlined positive signs: confidence between banks has risen, the market for repurchase agreements of Treasury securities has improved, secondary markets even for troubled mortgage-backed securities have more liquidity than they did in May.

 

“These are welcome signs, of course, but at this stage conditions in financial markets are still far from normal,” Bernanke cautioned. (See “Recovery: Are We There Yet?”)

 

Still, the battered housing market continues to drag. Data released Monday from the National Association of Realtors showed that home prices are still falling. In the first quarter of this year, the median home price dropped 7.7% from a year ago–the biggest decline in the 29 years NAR has compiled the prices.

 

The number of borrowers who owe more than their house is worth is still growing. Loan defaults and foreclosures are likely to continue, as will losses to the lenders. Foreclosures tend to drag down the prices of their entire neighborhoods. But even here, Lawrence Yun, chief economist of the National Association of Realtors, sees some signs of optimism: “Neighborhoods with little subprime exposure are holding on very well.” And at least banks are not originating new subprime loans.

 

Now for the second question: How to prevent risk in the future. That’s what makes Tuesday morning’s hearing significant. The early advice Congress receives could shape regulation of banks and the financial market for years or even decades. And, as Treasury Secretary Henry Paulson noted in proposing a series of regulatory reforms in March, “few, if any, will defend our current balkanized system as optimal.”

 

The March collapse of Bear Stearns exposed a weakness in the Gramm-Leach-Bliley Act, a 1999 law that removed the barriers between commercial banks, investment banks and insurance companies. The amount of systemic risk was not recognized until too late.

 

After Gramm-Leach-Bliley, banks and insurance companies were allowed to undertake the same activities, but they still answered to their old regulators. Five federal regulators oversee deposits, in addition to regulation from state governments. Futures and securities are regulated by separate agencies. Insurance regulation is spread across more than 50 regulators.

 

The result was a confused alphabet soup–SEC, CFTC, OCC, NCUA, FDIC–with muddled boundaries or, as SEC Chairman Christopher Cox described the result, “a statutory no-man’s land.”

 

But regulation presents pitfalls as well. It must be considered not in terms of more or less regulation but rather in terms of flexibility and efficiency. 

 

“In the wake of a bust, there is always a predictable series of political activities,” says Alex Pollock, former president of the Federal Home Loan Bank of Chicago, who will testify before the committee. “First, the search for the guilty; second, the fall of previously esteemed heroes; and third, legislation and increased regulation to ensure that ‘this will never happen again.’ But, with time, it always does happen again.”

 

The guilty have been identified as the twin bogeymen of the subprime underworld: “speculators” and “unscrupulous lenders,” enabled by banks unable to price risk and an irrational belief that home prices would always rise. The esteemed heroes have fallen: the collapse of Bear Stearns, disappointing results from Wall Street’s banks. Even Alan Greenspan has lost some of his luster.

 

The third act at the boom and bust theater is well under way. This week the Senate is ironing out its companion legislation to the House’s Foreclosure Prevention Act, which passed last week with a 266-154 margin. The president has indicated he would veto the bill’s current incarnation but could support a toned-down version. All that remains is the predictable regulatory overhaul and then a long wait for the inevitable cycle to begin in the future. 

 

 

Fed Confused on Policy

Virtually ALL of the the decisions concerning money supply and “regulation” are being made in the private sector which is devoted to one thing by mission and by intent: transfer of wealth to the big dogs in the private sector. This clearly government function, as specifically expressed in the U.S. Constitution has been abandoned by government and usurped by the private sector.

By allowing tainted money into the political system, actions that had been plainly illegal, immoral and unethical have become a way of life, legalized by laws passed to satisfy legislator’s obligations to lobbyists. Obama’s call for reigning back the forces of money from the private sector is a call to arms and a call for alarms — to regulate and disclose the billions of dollars spent by credit/financial industries, oil and gas, coal, drugs, healthcare and crime (yes, crime because close examination shows that some private sectors will ONLY make money if the jails are full).

The purpose of government — to be the referree between capital and labor in a market allowing forces of supply, demand and innovation to determine outcome — has been abandoned and must be re-asserted. If not, we become a third world country where the rich live in electrified bunkers with their own security staff and the rest of the population remains hopeless poor and in debt. The risk of violent revolution, food riots and knee-jerk policies generated from fear or anger will be the rule rather than the exception. This is hardly the result intended by the framers of our constitution.

As the comments indicate, the Fed policy-making apparatus is in tatters.

  • It lowers the Fed overnight rate and interest rates go up — something that was thought impossible by many people. 
  • It confronts hyper-inflation with a mixture of mentioning how serious the issue is and then lowers rates again, which we all know means increasing the money supply and increasing inflation. But then lenders still refuse to give loans to small business, homeowners and other key parts of the credit cycle that spur the economy. 
  • The plain fact is that the Fed is not having much effect at all on anything. 
  • It missed the opportunity to regulate and increase its influence to thwart the bubble in housing because politically it was expedient to do so in a Repiublican administration. 

We all pay the price as the economy and our society commences the wrenching process of remaking itself with a solid foundation of productivity, more even distribution of purchasing power, less impulse purchasing, more saving, and the prospects of slower growth and recession here and abroad.

The FED is diminished, probably permanently. Up until now nobody has addressed the issue head-on that neither the Fed nor the U.. Treasury, nor the Bureau of Engraving and Printing are having much impact on money supply, interest rates, prices or economic growth.

Virtually ALL of the the decisions concerning money supply and “regulation” are being made in the private sector which is devoted to one thing by mission and by intent: transfer of wealth to the big dogs in the private sector. 

Pianalto: Fed’s strategy compatible with low inflation rate
LONDON (MarketWatch) — Cleveland Federal Reserve Bank President Sandra Pianalto said Tuesday that inflation remains a top risk to the economic outlook, but that the Federal Reserve’s rate-cutting strategy likely wouldn’t stoke inflationary pressures. In a speech prepared for delivery in Paris, Pianalto said she finds herself in a “challenging environment” as a policymaker. “While even the core price measures in the United States are rising somewhat faster than I would prefer, and inflation presents a key risk to my outlook, I believe that the Federal Reserve’s policy strategy remains compatible with a low and stable inflation rate,” she said. Pianalto said it was important to distinguish between inflation and relative-price pressures. End of Story

Mortgage Meltdown: 12 million homes “under water”

TIME TO WAKE UP. EVEN IF YOU ARE NOT IN DEFAULT THE MORTGAGE MELTDOWN IS GOING TO HURT YOU UNLESS YOU ACT NOW. GET INVOLVED! THERE IS NO “MIDDLE GROUND”

Most projections put the number at over 20 million homes, which means that over 95% of the people negatively impacted by the mortgage meltdown either didn’t purchase or refinance their homes or if they did are not in default and think this situation will pass them by — after all “I’M NOT BEHIND IN MY PAYMENTS. I’M FINE!” No you are not!!! 

If this mess is not cleared up by aggressive government intervention you will permanently lose equity in your house, see your real estate taxes soar, and watch as inflation eats up that comfortable margin you think you have in income. 

Bernanke is no give-away liberal. He wants this because it is absolutely necessary and at that only a partial step. 

Write your congressmen and senators. We cannot afford stick our heads in the sand on this one on some ideological grounds protecting taxpayer bailouts or whatever. It doesn’t matter whether or not the mortgage meltdown started with borrowers being stupid or Wall Street being greedy. It happened. And now it’s a train wreck headed your way.

 

Anatomy of a Fight

Over Mortgage Bill

 

By JOSEPH SCHUMAN

THE WALL STREET JOURNAL ONLINE

 

A surge of partisanship has placed in jeopardy a bill aimed at helping homeowners who are at risk of foreclosure. But the political resonance of the issue could prompt the measure’s Republican critics and Democratic backers to find middle ground.

 

The bill would try to lower risks for both the lender and the borrower, by offering government-backed insurance to lenders willing to reduce the principal for loans made to some people who owe more on the property than the home is now worth. It passed through the House Financial Services Committee with 10 Republicans joining Chairman Barney Frank and the panel’s other Democrats. But after President Bush yesterday came out and threatened to veto the bill, Republicans threw up legislative roadblocks to keep the measure from the House floor, as the New York Times reports. Mr. Bush says the bill would “reward speculators and lenders” without making a big dent in the country’s mortgage and housing-market crisis. Moreover, Republicans argue, it means taxpayers could be stuck with bad loans newly insured by the Federal Housing Administration. But the issue is more complicated than that.

 

Wall Street Journal columnist David Wessel boils down the debate to a question of whether Washington should push the lenders to help Americans whose home values sank below the size of their mortgages “even if it may cost taxpayers some money,” with the White House saying “No!” and Mr. Frank, quietly backed by Federal Reserve Chairman Ben Bernanke, saying “Yes!” Citing research from Economy.com, Mr. Wessel puts the number of families with such “underwater” mortgages at about four million, and notes that number is predicted to reach around 12 million by early next year. While many of those families will keep paying their mortgages, “many won’t, and are at risk of losing their homes,” he says. Since “no one in Washington wants to help the ‘speculators'” who bought homes as investments, and most there agree people who bought houses they can’t afford are probably beyond aid, “the debate revolves around the ‘preventable foreclosures,'” he adds.

 

And no one, from the homeowners to the lenders to the politicians and economists like Mr. Bernanke, wants to let “preventable foreclosures” go unprevented. The bill, while crafted to exclude people who don’t need the help or wouldn’t benefit, “could allow some homeowners to get a deal they don’t deserve; that’s the unfortunate byproduct of any rescue,” Mr. Wessel notes. But the Treasury and Fed, he argues, “surrendered the let-the-market-work-it-out high ground when they agreed to risk nearly $30 billion of taxpayer money to shield Bear Stearns, its creditors and counterparties from losses.” Democratic legislators yesterday were mentioning the Bear Stearns bailout again and again.

 

The housing downturn is an economic problem with as much political resonance as gas prices, and if no relief is provided, it could be a poignant issue ahead of November’s elections. Even as Mr. Bush was threatening a veto yesterday, Keith Hennessey, director of the White House National Economic Council, was saying the differences between congressional Democrats and the administration aren’t “insurmountable,” the Journal reports, adding that this leaves the door open for an eventual deal.

Foreclosure Procedure: Judicial and Non Judicial Sales

Every state is different to some degree, which is why you can’t take this post to court with you and assume that you have the right legal information. Checking local laws, rules and practices is essential in any foreclosure defense, defense of eviction or making claims against the lenders, mortgage brokers and other parties before or after the sale.

Many people have asked the difference between the kinds of sales and procedures. This will give you a general idea. In my opinion the non-judicial sale is equivalent to a taking of property without due process. I believe it is against basic black letter law of the U.S. Constitution.

Judicial Foreclosures

Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. 

  • The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security.  
  • The homeowner will be served notice of the complaint, either by mailing, direct service, or publication of the notice, and will have the opportunity to be heard before the court.  IT IS RIGHT HERE THAT YOU SHOULD FILE YOUR CLAIMS, DENIALS, AFFIRMATIVE DEFENSES ETC. A Motion to Dismiss claiming the Plaintiff has failed to plead or attach proof that it is the owner of the mortgage and note and still possesses the right to pursue foreclosure. In a fair number of cases they won’t have the documentation and the foreclosure will be dismissed because the Plaintiff “lacks standing.”
  • You should file for discovery — interrogatories, requests for admissions and requests to produce relating to the accounting for your payments, the schedule of payments received and when they were posted, and the names and addresses of people who have original documentation including the note, mortgage, assignment of the mortgage and note, sale of the loan, or other instruments showing that some third party, who is NOT party to the action, is the actual party in interest. Then you can show the court that the wrong person is before the court suing you, or at least that an indispensable party is not present. 
  • If that is the case, summary judgment will probably be denied, judgment could be entered in your favor (unlikely but possible) and/or the action will be dismissed without prejudice (which means they can get their act together and sue you again. The probability is that once dismissed, it will go to the bottom of their pile and they will pursue the “low handing fruit” which are people who don’t know the their rights or how to fight back.
  • If the court finds the debt valid, and in default, it will issue  a judgment for the total amount owed, including the costs of the foreclosure process.  
  • After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale.  
  • The sheriff’s sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps, to in front of the property being auctioned.   
  • Sheriff’s sales will generally require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale.  Check your local procedures carefully.  
  • At the end of the auction, the highest bidder will be the owner of the property, subject to the court’s confirmation of the sale.  
  • After the court has confirmed the sale, a sheriff’s deed will be prepared and delivered to the highest bidder, when that deed is recorded, the highest bidder is the owner of the property. Contesting eviction after this point is highly problematic, but you still retain rights to sue the lender for TILA, Fraud and other violations and claims. TILA is NOT generally regarded as a compulsory counterclaim and so the theory is neither is fraud. The safest route is to bring your claims when your first responses are due. 

Non-Judicial Foreclosures

Non-judicial foreclosures are processed without court intervention, which means that the notice of sale and the actual sale can take place without the lender proving to the court that it has a right to do so. The burden is shifted to YOU the borrower to bring a lawsuit agaisnt the the Lender to stop the sale. Obviously this precious piece of legislation was established through aggressive lobbying and campaign contributions to the states which allow this patently wrong procedure, which unfairly puts the burden on the least sophisticated player (you) who has the least resources to start a legal action. Where is the ACLU when you need them?

The sale takes place with the requirements for the foreclosure established by state statutes. 

  • When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time.   The fact that, like many of our readers, you are NOT in default and that the lender has made multiple errors, committed many violations of the Truth in Lending Act (TILA) is not in issue because the state only requires the Lender to post notice. The fact that the real lender, the one who actually put up the money for the mortgage and note and who owns it now does not appear on the Notice, or that the Trustee no longer has the authority to proceed are issues that the Lender sidesteps in states that permit this awful procedure.
  • If the homeowner does not cure the default (the borrower is presumed to be in default upon the filing of the notice, which immediately screws up your credit and makes certain you cannot refinance because you already “in foreclosure”), a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder’s office, and published in area legal publications.  
  • After the legally required time period has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recordation of the deed. Showing up at this sale and announcing that you are contesting the sale and the foreclosure generally will stop anyone from bidding. 
  • Auctions of non-judicial foreclosures will generally require cash, or cash equivalent either at the sale, or very shortly thereafter.

It is important to note that each non-judicial foreclosure state has different procedures.   Some do not require a Notice of Default, but start with a Notice of Sale.   Others require only the publication of the Notice of Sale to announce the sale, with no direct owner notification required.  You need to know the specific procedure for your state.

American Meltdown: 3AM or 8PM—Emergency vs Urgency

Thomas Friedman, in Michael Moore -like frankness, doesn’t make a case, create a sound bite, or try to get elected. Here he simply tells the facts. 

If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

People want to do nation-building. They really do. But they want to do nation-building in America.

Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

The emergency is that the fiscal fiasco of the last 7 years is frightening larger than any public figure has stated. Who will tell the people? The reason why you hear scattered comments about this period being comparable to the great depression is that we have dug a real hole for ourselves, so big, so deep, that we can’t see the bottom anymore.

  • Buffett and others are admitting it — economists are slyly predicting it without being accused of starting riots and panic. There is general agreement that the housing market could have another 20% correction from current levels.
  • 20-30 million American homes will have greater mortgage indebtedness than they are worth within 12-14 months.  The same people are mired in credit card debt carrying interest and fees that assures( or at least threatens) the virtual permanent enslavement of a significant portion the American people. Americans spend more money on debt service (interest payments and principal) than many countries do on EVERYTHING. 
  • We have locked ourselves into an energy policy that allows both domestic and foreign enemies of freedom almost unfettered control over our property, our food, our lives and our civil liberties. We have done this while having the technology and knowledge to reduce our oil and gas consumption to a negligible amount, forever abandoning foreign policy based upon foreign fuel supplies. 
  • Inflation is already five times higher than the manipulative government statistics reported and it is increasing. 
  • Joblessness is five time higher as well. 
  • The Iraq war will take at least 7 years — our longest war.
  • Our healthcare system is in the death grip of a few people who have turned our vulnerability into an excuse to rob the public treasury and the private finance of every individual.
  • 1929? — we already there and headed downward, burdened in more debt than any country or its people have acquired in the world history.
  • And in world opinion our stock of confidence has never been lower and is clearly declining every other day, as the dollar goes lower and lower and the world’s central bankers look for alternatives for their currency reserves — anything other than the plummeting dollar. They know we caused, allowed and promoted the worst outbreak of financial fraud in history and that the measurement of the scope of the fraud keeps growing every day by trillions of dollars.

So there is the emergency. The urgency is that there is hope.

The Mortgage Meltdown was the trigger, the wake-up call that the fundamentals of our policy, our society and our economy were all wrong. The people know it, with 4 out of people asserting we are headed in the wrong direction.

We emerged from the Great Depression and we can emerge from this too, perhaps a little battered and wiser but still standing tall. The way we can do that is through ruthless truth, a tolerance for ambiguity, transcending our fears, acceptance of failure, determination to succeed, and persistent pursuit of the core values expressed, although unevenly lived, in our Declaration of Independence and our U.S. Constitution. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

May 4, 2008
OP-ED COLUMNIST

Who Will Tell the People?

Traveling the country these past five months while writing a book, I’ve had my own opportunity to take the pulse, far from the campaign crowds. My own totally unscientific polling has left me feeling that if there is one overwhelming hunger in our country today it’s this: People want to do nation-building. They really do. But they want to do nation-building in America.

They are not only tired of nation-building in Iraq and in Afghanistan, with so little to show for it. They sense something deeper — that we’re just not that strong anymore. We’re borrowing money to shore up our banks from city-states called Dubai and Singapore. Our generals regularly tell us that Iran is subverting our efforts in Iraq, but they do nothing about it because we have no leverage — as long as our forces are pinned down in Baghdad and our economy is pinned to Middle East oil.

Our president’s latest energy initiative was to go to Saudi Arabia and beg King Abdullah to give us a little relief on gasoline prices. I guess there was some justice in that. When you, the president, after 9/11, tell the country to go shopping instead of buckling down to break our addiction to oil, it ends with you, the president, shopping the world for discount gasoline.

We are not as powerful as we used to be because over the past three decades, the Asian values of our parents’ generation — work hard, study, save, invest, live within your means — have given way to subprime values: “You can have the American dream — a house — with no money down and no payments for two years.”

That’s why Donald Rumsfeld’s infamous defense of why he did not originally send more troops to Iraq is the mantra of our times: “You go to war with the army you have.” Hey, you march into the future with the country you have — not the one that you need, not the one you want, not the best you could have.

A few weeks ago, my wife and I flew from New York’s Kennedy Airport to Singapore. In J.F.K.’s waiting lounge we could barely find a place to sit. Eighteen hours later, we landed at Singapore’s ultramodern airport, with free Internet portals and children’s play zones throughout. We felt, as we have before, like we had just flown from the Flintstones to the Jetsons. If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

How could this be? We are a great power. How could we be borrowing money from Singapore? Maybe it’s because Singapore is investing billions of dollars, from its own savings, into infrastructure and scientific research to attract the world’s best talent — including Americans.

And us? Harvard’s president, Drew Faust, just told a Senate hearing that cutbacks in government research funds were resulting in “downsized labs, layoffs of post docs, slipping morale and more conservative science that shies away from the big research questions.” Today, she added, “China, India, Singapore … have adopted biomedical research and the building of biotechnology clusters as national goals. Suddenly, those who train in America have significant options elsewhere.”

Much nonsense has been written about how Hillary Clinton is “toughening up” Barack Obama so he’ll be tough enough to withstand Republican attacks. Sorry, we don’t need a president who is tough enough to withstand the lies of his opponents. We need a president who is tough enough to tell the truth to the American people. Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

Who will tell the people? We are not who we think we are. We are living on borrowed time and borrowed dimes. We still have all the potential for greatness, but only if we get back to work on our country.

I don’t know if Barack Obama can lead that, but the notion that the idealism he has inspired in so many young people doesn’t matter is dead wrong. “Of course, hope alone is not enough,” says Tim Shriver, chairman of Special Olympics, “but it’s not trivial. It’s not trivial to inspire people to want to get up and do something with someone else.”

It is especially not trivial now, because millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. They want it to be about building wealth and dignity — big profits and big purposes. When we just do one, we are less than the sum of our parts. When we do both, said Shriver, “no one can touch us.”

Fed Lies and Sound Bites

The latest change in Fed policy sounds good. You get that warm fuzzy feeling that credit will loosen up and that things are getting better. But the fact remains, that this is ANOTHER transfer of the power to create money to the PRIVATE sector, it is another green light for PRIVATE TAXATION, and worst of all, it comes at a time when inflation is already running high and threatening to become worse than at any time in recent history.

Flooding the market with more dollars is simple: it reduces the value of those dollars. as the value goes down some businesses will appear to prosper, but when those business owners go to buy something, they will realize they lost profit even though their accountants report they made more. In nutshell, if it costs $25 to buy a loaf of bread or $15 to buy a gallon of gas, the fact that your sales went up won’t do you any good.

Beware the earnings figures from public reporting companies. There is no FASB directive that requires real disclosure of real earnings in constant currency. This will become painfully obvious as the next 12 months unfold.

THE FED
Fed expands auction, accepts wider collateral
NEW YORK (MarketWatch) — The Federal Reserve, along with other central banks, said Friday that it was increasing the funding it is providing to banks and announced that, for the first time, it was willing to accept bonds backed by auto loans and credit cards.
“In view of the persistent liquidity pressures in some term funding markets, the European Central Bank, the Federal Reserve and the Swiss National Bank are announcing an expansion of their liquidity measures,” the Fed said in a statement.
The Fed took the move in an attempt to flood the market with supply and lower short-term lending rates, such as the London interbank offered rate, or Libor.
The U.S. central bank announced an increase, to $75 billion from $50 billion, in the amounts auctioned to eligible depository institutions under its biweekly Term Auction Facility, beginning with the auction on May 5.
This increase will bring the amounts outstanding under the TAF to $150 billion.
The move to expand the TAF was widely anticipated because of strong demand for loans through the program.See full story.
“The program is now reaching a magnitude where it can play a significant role in plugging the gap between the remaining demand for unsecured term funding in the bank market and the latest decline in supply following the run on Bear Stearns,” wrote Lou Crandall, chief economist for Wrightson ICAP.
The expansion was “probably marginally disappointing because there was a widespread expectation … that the Fed would extend the term of at least some TAF auctions to three months,” wrote Stephen Stanley, chief economist for RBS Greenwich Capital.
The TAF, announced on Dec. 12, was followed in March by the creation of several other Fed lending programs targeted at different sectors of the credit markets.
All told, the Fed has now offered to lend up to $462 billion in cash and Treasurys to the markets, in addition to the nearly unlimited funds available through the discount window and the primary credit dealer facility.
The three-month Libor rate — a benchmark for lending between banks — was 2.78% on Thursday, well above the 2% federal funds rate. Crandall said extra supply from the Fed in the next three weeks should tighten the spread between the Libor and fed funds rates.
Deeper cooperation
The Federal Open Market Committee also has authorized further increases in its existing temporary currency-swap arrangements with the European Central Bank and the Swiss National Bank.
These arrangements will now provide dollars in amounts of up to $50 billion and $12 billion to the European Central Bank and the Swiss National Bank, respectively, representing increases of $20 billion and $6 billion.
The FOMC also authorized an expansion of the collateral that can be pledged by bond dealers in the Fed’s Schedule 2 Term Securities Lending Facility auctions of Treasurys.
Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations.
Accepting asset-backed paper could help provide money to the student-loan market, Crandall noted. End of Story
Steve Goldstein is MarketWatch’s London bureau chief. Washington Bureau Chief Rex Nutting contributed to this report.

Energy Policy and Return on Investment

 

While we love our contentious politics and passionately favor our pretty candidates, we lose sight of the fact that there is actually some work to do and that the policies that will get that work done are complex, filled with nuance, trapdoors and obstacles.

Politics is well-suited to sound bites, but governance is far more complex than that. We favor Obama’s candidacy not because he knows everything about energy policy or economics — he doesn’t and neither do any of the other candidates. We favor him because he understands that any policy that is actually effective must engage the voters and decision-makers in the private and public sectors and his approach is more likely to achieve that plan of engagement. He is betting that people will accept some ambiguity and mistakes in the pursuit of good governance.

The business case discussed below must present the voter or decision-maker not only with some proposal that is based upon his direct benefits, but all the indirect benefits he/she will receive, the fact that there will be government incentives, and the fact that his/her competitors are getting the benefit of having already subscribed to the new policy. If the decision-maker is not sold on all these factors, he/she won’t do it. His/her job is on the line. Everyone wants to be a hero but nobody wants to risk cutting their employment throat. 

As the following article points out, the largest problem confronting us in changing the energy paradigm is the bean counter. Return on investment (ROI) is a term that is widely used and presumed to mean something. Unfortunately it  doesn’t mean anything except to the speaker. We all mean different things when we talk about whether a project is “worth” doing. That’s where government comes in as the referee.

Good government policy defines the scope of a project, the benefits and the costs in a way that educates people and has them speaking about it in the same way, using terms that are understood by everyone the same way. It is from the higher government point of view that decision-makers in the private sectors can gain a perceptual advantage as they see their place in their industry and their place in the economy as a whole.

Good government policy provides incentives and reliable information for decision-makers to make good decisions not only indiivudally for their own companies, but collectively so that each industry and each company, along with the economy as a wholoe has an opportunity to achieve a stable growth pattern, secure in the knowledge that we remain ahead of teh curve.

Energy policy is part of the larger government role of national security. We can all agree that we want to pursue policies that will increase the likelihood of peace and prosperity, where tax rates are low, tax revenues are high (because of high growth economic activity and productivity) and reducing entangling alliances and policies that might increase the the prospect of an expensive war or distract us from maintaining the value of our currency, while keeping the pressures of inflation checked.

Thus we all know that good national and state economic policy includes effective administration of an energy policy. However in a democratically driven republic with capitalist economic underpinnings nothing works without “consent of the governed.” Cooperation of voters and private sector decision-makers is not merely helpful, it is required. Consent cannot be effectively coerced without most of the rest of the voters or decision-makers subscribing to the policy (peer pressure and reducing the perception of risk because others are doing it). 

Thus the mission of the next administration will be to communicate effectively with the private sector and with voters to change the paradigm of energy production and consumption.

 

  • For example, plug-in hybrids that will provide a range of perhaps 40-50 miles on battery power alone, requires somewhere to plug them in. 
  • If they are plugged in overnight when usage is lowest, then the utility companies get increased revenues and profits, and government should reward the utility companies with credits for participating in the reduction of the carbon footprint of transportation. 
  • But if the cars are plugged in during peak hours, it could be a financial disaster for the utility companies unless they are able to secure cheap energy to absorb the already overloaded hours.
  • This opens the door for wind turbine and solar capture farms in areas that are presently unused, and which would be environmentally unaffected by installation of renewable energy sources. 
  • It opens the door for entrepreneurs to convert existing hybrids to plug in versions and for car manufacturers to offer new vehicles with the hybrid capability to  run on battery alone, run on gasoline, run on diesel and even to run on alternative bio diesel.
  • It opens the door for entrepreneurs to offer home conversion for solar (PV) electricity for powering up those hybrids, golf carts etc. during PEAK times.
  • This in turn opens the door for companies that deliver products and services to businesses and residences to convert to such vehicles, including government society services like police, fire, public transportation etc.
  • The result if properly administrated and orchestrated, is a direct cost savings to all the participants, direct increase in profit for the private sector, direct decrease in major costs for government services, and indirect benefits that are more important at higher levels of government than a particular locale or even state.
  • ALL of this requires an effective leader who gives voice, vision and direction motivated by a desire to produce a benefit to society (everyone) rather than part of a society with merely leads to abuses that are always traced to schemes that are merely masked agendas for transfer of wealth, accumulation of power and the enslavement of the citizenry. 

 

Thus the business case discussed below must present the decision-maker not only with some proposal that is based upon his direct benefits, but all the indirect benefits he will receive, the fact that there will be government incentives, and the fact that his competitors are getting the benefit of having already subscribed to the new policy. If the decision-maker is not sold on all these factors, he/she won’t do it. His/her job is on the line. Everyone wants to be a hero but nobody wants to risk cutting their employment throat. 

ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc

 

Sales & Marketing: Why ROI Calculators are a Formula for Failure

Financial justification tools face three major challenges: Prospects don’t believe their output; facilities managers are not financially trained; and sales reps are not trusted to explain the numbers.

Rebates, ITCs, projected energy costs, NPV… Finance is not a shallow subject, but most people barely get their toes wet before they drown. Just ask three CFOs to explain “return on investment.” You’ll soon be gasping for air, even if you thought you knew what it meant.

When it comes to sustainability, for-profit corporations still do more talking than buying. Without a business case, few projects end up getting past the “nice idea” stage.

This is as true for chiller plant controls as it is for a utility-class wind farm. Capex approvers need convincing that sustainability goes beyond saving polar bears, and isfiscally the right thing to do for their company.

Take energy efficiency as an example, performance contracts aside. Unless a sales rep can get C-level executives to think about energy as a manageable P&L line item, instead of as a fixed expense, the rep will be going out the way they came in — empty-handed. No business case, no deal.

Point of failure

Who prepares the business cases for your proposals? Unless you can find a way to keep your finance department out of doing it, this is a bottleneck in the sales process. Thus the popularity of ROI calculators.

Does your company use an ROI calculator?
Post a comment and share your experience.

Sales reps who open up an ROI calculator are likely to experience a vague sense of dread. The facilities manager doesn’t really understand or believe the result — accounting isn’t their profession, after all — but they provide the numbers and nod politely.An attempt to explain the results is likely to embarrass the sales rep — accounting isn’t their profession, either — but they try. The prospect does more nodding, and grows more skeptical.

So, companies say they have tools to calculate payback, reps say they use them, and prospects say they understand the results. The marketing department, who spent plenty to have the ROI tool developed, hears neutral feedback or nothing at all. They don’t know the tool is ineffective and has fallen into disuse.

Soon, though, the tool is out of date. The state grant expires, the latest energy bill changed the depreciation rules again, or energy costs have outpaced the projections. Even a spreadsheet that is still valid is not trusted beyond a few months after it was created.

What’s the formula?

In companies where I’ve seen ROI tools succeed, there have been common traits. First, these typically are larger companies with multiple products, so they have more than one ROI tool. One or two people with financial backgrounds are assigned to researching, building, and maintaining the tools. They take pride in their product.Second, each tool is designed to allow the prospect and sales rep to produce a believable business case. That means believable for the customer even if it’s not as favorable to the vendor. When it’s readable and believable, it has a chance of showing up in the C-level decision maker’s e-mail. All assumptions and constants are footnoted with credible sources, and none of them are locked. If the prospect wants to reduce the power factor or increase the number of cloudy days, let them. It’s their ROI.

Finally, train sales reps and give them a support line. Try as you may to make the user interface simple, it’s still Excel and it’s still complex. Webinars are effective at teaching sales reps how to use these tools, especially in a third-party sales channel — and the recording of the webinar stays around for reference. Reps then need to know who to call for help whenever they get stumped in front of a prospect.

To close a business-to-business sale, you need to demonstrate the cause-and-effect relationship between investing in your product and achieving a business goal. In the C-suite, there’s nothing as powerful as a good ROI tool in the hands of someone who is comfortable using it.

 

Mortgage Meltdown: Congress Makes the Right Moves!

Today we have a bill pending that stops the meltdown. It is a courageous and creative step that protects all parties. It requires YOUR input, so pass this along to as many other people as you can. This is much more than a step in the right direction. It would be nice to see support from the presidential contenders as well.

Write your congressmen and women and get this thing passed. The Senate and House are standing on the line between mayhem and an orderly society and have taken the right steps. The rest is up to you.

It isn’t perfect, but the bill would do more to stem the tide of foreclosures, evictions and declining home prices than anything else on the table. It will protect your home equity, it will stabilize the economy, and it will give the U.S. dollar just the shot of confidence it needs to slow the rising threat of hyper-inflation.

Call and write your congressman/woman, call and write your senators, flood them with emails.

This is not about the morality of or ideology of whether it was more the fault of one group over another. This is about the practicality of holding our society together. Nothing is more important to the your lifestyle than this bill no matter who you are.

May 2, 2008

Mortgage Aid Plan Advances in House

WASHINGTON — The House Financial Services Committee pushed forward on Thursday with an aggressive effort to help troubled homeowners, approving legislation that would make up to $300 billion in federally insured loans available to refinance the mortgages of borrowers in danger of foreclosure.

With passage of the House bill virtually assured, debate over how best to address the downturn in housing shifts back to the Senate, where Democrats drafting a similar plan are struggling to overcome the reservations, if not outright opposition, of a more robust Republican minority.

President Bush has called on Congress to pass very specific legislation to update the operations of the Federal Housing Administration, to tighten regulation of the government-sponsored financiers Fannie Mae and Freddie Mac and to let state and local housing authorities use tax-exempt bonds to refinance bad loans. But he opposes the more expansive legislation pursued by Democrats.

The Financial Services Committee approved the bill 46 to 21, with 10 Republicans joining the Democrats in favor of it.

Representative Barney Frank, Democrat of Massachusetts and the chief author of the housing legislation, said Thursday that he hoped President Bush would sign the bill if it reached the White House as part of a wider package and it contained the legislation that Mr. Bush had demanded.

The Democrats’ legislation seeks to help homeowners by requiring lenders to reduce the principal balances for borrowers at risk of default. The bad loans, typically with high adjustable rates, would be refinanced into more affordable 30-year fixed-rate loans insured by the F.H.A.

The new loans would be limited to no more than 90 percent of a property’s value, based on an updated appraisal. The government would retain a stake in any future sale of the property, worth 3 percent of the initial loan balance or 50 percent of net profit from a sale, whichever is greater.

Borrowers would have to demonstrate the ability to repay the new loan, and if they default, they will forfeit the property. Democrats say the plan could help as many as 1.5 million homeowners.

The Bush administration calls that goal unrealistic and says achieving it would require loosening underwriting rules that would put taxpayer money at too much risk. But the administration’s own effort to help troubled borrowers, called F.H.A. Secure, has so far aided only about 2,000 homeowners who were clearly behind in repaying their loans.

In an interview, Mr. Frank said that Republicans, including the president, understood that the government-sponsored lenders were playing an increasingly vital role in the stability of the economy and that they were now anxious to tighten regulation.

“Don’t underestimate the importance” of changes affecting Fannie Mae and Freddie Mac, he said.

As for the Senate, Mr. Frank said: “I am not going to guess.”

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, had been hoping to complete work next Tuesday on a bill that would incorporate the broad expansion of federally insured loans sought by Democrats with a Senate version of the legislation sought by the Bush administration. But aides said a committee vote would be delayed to at least Thursday or perhaps the following week.

In a statement on Thursday, Mr. Dodd said he hoped to reach a deal, even as some Senate Republicans said they remained uncertain.

“Our top priority right now should be helping people keep their homes,” Mr. Dodd said, praising the House committee’s vote. “This is another step in the right direction.”

He added: “I am committed to working on bipartisan legislation with my colleagues in the Senate banking committee to reduce foreclosures and restore liquidity to the mortgage market.”

A spokesman for Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, declined to comment.

Republican support for the Democrats’ plan has waned in recent days. Senator Mel Martinez, Republican of Florida and a member of the banking committee, who had previously advocated aggressive government action to stem foreclosures, this week said that he supported the more measured response favored by President Bush. Florida is one of the states hit hardest by foreclosures.

Mortgage Meltdown: Fixing Broken Mortgages — Getting New terms

CLINTON — MCCAIN FORECLOSURE FREEZE GETS COLD SHOULDER BUT SOUNDS GOOD

Well here is a version (SEE ARTICLE BELOW) of what we have been pushing for months —- changing the terms of the mortgages so that the homeowner can stay in the house and the mortgage can be modified, sold or recast for capital accounting. This is a lot more sophisticated than the “mortgage freeze” proposed by Clinton and McCain and it is working already so we can’t dispute the success.

  • The problem with a “mortgage foreclosure freeze” is that it is a sound bite that doesn’t really mean anything — like the gas tax holiday. It doesn’t address any of the problems but it gives rise to the illusion that the homeonwer is getting some relief.
  • The problem for Obama is that he sounds like he is against providing relief because he understands the nuances of how to get that relief — without pandering for votes. People don’t like nuance and don’t have the time for complex answers. So they vote against themselves based on sound bites, hoping gas prices will go down (they won’t) and that their house will be saved by just doing one thing like a freeze on foreclosures that lasts ninety days (that won’t work either).

There is no Clinton-McCain plan for relief because no order, legislation or rule is pending that will freeze anything and nothing is pending. Hillary and John are just blathering. They haven’t ACTUALLY proposed the plan by introducing a bill on the Senate floor. The plan of these pandering politicians is get elected (the people be damned): the method is to make use of time-honored sound bites that consist of misleading statements and outright lies. The truth is that neither McCain nor Clinton has a clue about gas prices or mortgages.

Although this trading of mortgage obligations is obviously providing some relief, it doesn’t address the root cause of the mortgage meltdown. And much as I don’t care for the people or their methods who perpetrated this fraud on the world, there is no REAL solution unless some value is restored to the balance sheet of financial institutions and investors who purchased the collateralized mortgage obligations. Thus combining attributes of this plan with a more comprehensive plan to restore the capital reserves of financial institutions and investors would be preferable.

vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv

HOUSING

Investors move in to save broken mortgages

Homeowners who owe more than their property is worth are offered new terms.

By E. Scott Reckard
Los Angeles Times Staff Writer

May 1, 2008

Jared Lanning, struggling to pay a home loan on which he owed more than his house was worth, was thinking he might just let the lender take back the property. Then he got a call one evening from an Orange County investor who had bought his mortgage.

“I want out of your loan,” said the investor, Evan Gentry, chief executive of G8 Capital of Ladera Ranch, who offered to lower the balance and the interest rate.

Lanning, a crane operator in Englewood, Colo., was skeptical. A phone pitch, after all, had led to his getting the unaffordable loan in the first place. But Gentry was legit: He helped Lanning get a new Federal Housing Administration-insured mortgage — with a $12,000 lower balance. Gentry also paid $5,000 in closing costs for the new loan. Lanning’s new monthly payment is $200 less than before.

Investors — including big fish like former Countrywide Financial Corp. President Stanford Kurland as well as smaller fry like Gentry — are buying loans on the cheap from lenders who want them off their books. By paying less than face value for the mortgages, the new holders can modify loan terms, including shrinking the amount owed, and still make money.

With some economists projecting 2 million foreclosures this year, legislators and regulators are hoping to encourage wide use of this model. They want lenders and investors in mortgage bonds to mark down what borrowers owe and then provide them with lower-cost loans. It’s a tricky business: No one wants to be seen as bailing out speculative buyers or imprudent lenders, but they also don’t want mass foreclosures to devastate neighborhoods and the economy.

The Federal Deposit Insurance Corp. described the problem Wednesday as “a self-reinforcing cycle of default, foreclosure, home price declines and mortgage credit contraction, the likes of which we have not experienced since the 1930s.” The agency is proposing that the government lend $50 billion to 1 million borrowers to help them replace unaffordable loans.

Sub-prime mortgages with interest rates ratcheting higher have proved less of a problem than once feared, because interest rates overall have dropped. But a “toxic combination” of falling home prices and borrowers who can’t afford even the initial low rates on adjustable loans is now the issue, FDIC Chairwoman Sheila C. Bair said in an interview this week.

“Many more borrowers are under water,” she said. “And many more are just walking away.”

Many people bought homes with nothing-down loans at the peak of the housing boom — 29% of all buyers in 2007 made no down payments, Treasury Secretary Henry S. Paulson Jr. said recently. Others have sucked all their equity out of their properties with refinancings.

According to Moody’s Economy.com, some 8.8 million Americans — more than 10% of all homeowners — owe more than their houses are worth, although a Mortgage Bankers Assn. economist contended the figure was lower, perhaps 8%. In any case, there is wide agreement that many of those troubled borrowers have proved surprisingly ready to abandon their properties, even when lenders offer to modify their loan terms as they were encouraged to do by the Bush administration.

“We are working with borrowers to keep them in their homes, but a lot of them really don’t want to stay,” said Babette Heimbuch, chairwoman of FirstFed Financial Corp. of Los Angeles, a savings and loan operator that specialized in adjustable-rate mortgages, including many that were made without full documentation of borrowers’ incomes.

FirstFed has about $6.3 billion in loans on its books. It said that $667 million of that balance, more than 10%, was delinquent or in foreclosure as of March 31, up from just $46 million a year earlier. FirstFed said Wednesday that it lost $69.8 million, or $5.11 a share, during the first quarter this year compared with a profit of $8.4 million, or 61 cents, a year earlier. It set aside $150.3 million for loan losses during the quarter, up from $3.8 million during the first quarter of 2007.

Because FirstFed kept most of its loans on its books rather than selling them, it should have been easier for the company to work with borrowers to modify the loans. Heimbuch said FirstFed forecloses only after analyzing 10 other options to offer the borrower, including lowering the interest rate; changing to a five-year, fixed-rate loan requiring payment of interest only; and writing down the loan balance.

Still, she said, up to 50% of borrowers who miss payments don’t respond to letters and repeated telephone calls to see if something can be worked out.

Some customers had acquired second mortgages and couldn’t make new arrangements with the other lender, she said. “I think some know they told us the wrong income and are afraid to come clean, though we would still work with them . . . to keep them in their homes if possible.”

For struggling borrowers, it’s a big mistake not to return such calls these days, said Gus A. Altazurra, a veteran mortgage executive who recently raised $10 million from private investors to buy and modify loans for which homeowners are still making payments.

“They’re probably going to help you, given the current situation,” said Altazurra, whose Irvine-based Vertical Fund Group has been negotiating with lenders of all sizes to buy loans. He said “a flood” of mortgages went up for sale in April after lenders closed their books on a horrendous first quarter.

Altazurra, who has paid as little as 31 cents on the dollar for some loans, said the terms of some mortgages made at the peak of the boom were hard to believe. One loan he bought from a Texas bank was to a borrower with a very low credit score — 484 — who refinanced and cashed out 100% of the equity in the property, he said.

Gentry, the other Orange County loan buyer, said he had obtained commitments from investors to provide $100 million in capital for workouts on loans that have stopped paying, current loans that can no longer be sold and foreclosed properties. He has bought nearly $50 million in mortgages and property so far.

Gentry purchased Lanning’s loan in a pool of mortgages from a San Diego lender that was going out of business. He said that on average his private venture was paying 70 cents to 80 cents on the dollar for loans like Lanning’s that were still current, and “less if the loans are nonperforming.”

Lanning had no home equity left — and thus had little incentive to keep sacrificing to make payments — before he got the smaller, cheaper FHA loan. Now his outlook has changed.

“We can’t do anything frivolous now,” he said. “But if we do it right, we have enough. That other loan was just pushing us over the top.”

Mortgage Meltdown: Let’s See if we can help this Guy

Dear Sir/Madam,
 
I need an attorney who will fight for me, would you watch my short documentary video on the predatory lending that I fell victim to. If you can assist me in any area of the subject matter, I would greatly appreciate it time is very short for me.  
 
http://www.youtube.com/watch?v=NCsRr61qZJQ
 
Thanks in advance,
Ernie Paul Young
5573 Burr Hill Rd 
Rhoadesville, Va 22542
Cell 540-308-5894

%d bloggers like this: