In a July 14, 2008 AP article titled: Fed adopts plan to curb shady mortgage practices , Fed chairman Ben Bernanke is quoted as saying:

“Although the high rate of delinquency has a number of causes, it seems clear that unfair or deceptive acts and practices by lenders resulted in the extension of many loans, particularly high-cost loans, that were inappropriate for or misled the borrower.”

Keep that in mind as you read these two sections taken directly from Title 12 (quoted as 12USC) of the United States Code:

Sec. 354. Transactions involving gold coin, bullion, and certificates

Every Federal reserve bank shall have power to deal in gold coin and bullion at home or abroad, to make loans thereon, exchange Federal reserve notes for gold, gold coin, or gold certificates, and to contract for loans of gold coin or bullion, giving therefor, when necessary, acceptable security, including the hypothecation of United States bonds or other securities which Federal reserve banks are authorized to hold.

Sec. 411. Issuance to reserve banks; nature of obligation; redemption

Federal reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.

Read the sentences I placed in bold print. Does anything jump out at you? When I first read these two sections in the ‘90’s I immediately called the San Francisco federal reserve bank.

I wanted to redeem my FRN’s (Federal Reserve Notes) for gold. I was told all I could get for my FRN’s was like denominated FRN’s. In other words, if I came into the bank with a FRN that was denominated with a 5, I would receive another 5 FRN in its place.

It was explained to me that these sections didn’t mean what they say. What they really mean is a person can show up at any Federal Reserve Bank and get only a like denominated Federal Reserve Note. They wouldn’t receive any gold or silver despite the plain language of the code sections.

Accepting that on face value, let’s read Bernanke’s remarks again but with a question in mind. That question being, how does a liar and deceiver expect anyone to believe any of his remarks.

The quoted sentence was from an article about the fed stepping in with new and better regulations covering mortgage lenders if you hadn’t figured that out. The first clause of his remarks is actually the smoking gun (according to me).

The many causes are actually only one – the federal reserve. This is an organization that has plundered the value completely out of our currency and is now bombarding us with smoke and clouds on how it intends to fix the problem.

Hogwash. The problem is fixable immediately and it is fixable through the above two cited sections from 12USC. Again, that is according to me.

So you don’t think I’ve fallen and knocked all the sense out of my head I call your attention to 12 USC 95(a) (Regulation of transactions in foreign exchange of gold and silver; property transfers; vested interests, enforcement and penalties). Pay particular attention to this section. It has never been repealed.

This section was used by Roosevelt in his power grab. To understand how Roosevelt used it to take over the banking system and how that takeover is still in force today, read Working Paper 9405 by Walker F. Todd, assistant general counsel and research officer, Cleveland FRB (retired).

While this one paper alone won’t provide all the answers, it will act as a blueprint for today’s banking/mortgage crisis. What is happening today has already happened during the Hoover and Roosevelt administration.

There is nothing new under the sun. Next week, I will present another solution to our current mess. That solution will be supported by U.S. Supreme Court cases which, by the way, tell us what we actually already know.

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Tags: Bank notes, Ben-Bernanke, bernanke, bullion, delinquincy, federal reserve, gold, monetary policy, month

There is a law in physics that says: For every action, there is an equal and opposite reaction. The same is true is a rate cut by the Federal Reserve. Many people get excited when the Federal Reserve cuts a key interest rate. They somehow see this as a magic bullet that is going to fix what ails the economy. They are often surprised when they don’t see an instant economic turnaround.

The idea behind a rate cut is to stimulate the economy by encouraging businesses to borrow and expand. However, people have a tendency to focus on the impact that the rate cut has in their world. They don’t see the ramifications of the Fed action to the economy as a whole. If all that was necessary to promote economic growth was to lower interest rates, why not keep them at 0%?

The Good

The good part of a rate cut is fairly obvious to most. Indeed, for many, that is all that they see. The cost of borrowing is lowered. Adjustable Rate Mortgages that are tied to short-term Treasury Bills are lowered. Home equity credit lines tied to the prime rate are lowered as well as the interest rate on many adjustable rate credit cards. One of the biggest beneficiaries is the Government itself. With trillions in debt, lower interest rates have a huge impact on the Federal Budget since so much is spent on debt service. So with all of these benefits, what could be wrong?

The Bad

Tags: Ben-Bernanke, bernanke, fed, federal reserve, rate cut, real estate investing

Want to know just how bad the mortgage / housing / credit / banking / securities / oil / crisis has become? Okay. When was the last time you heard a high ranking government official actually call for lenders to slash the amount of their loans…NOT the interest, the principal!

That is exactly what Federal Reserve Chairman Ben Bernanke has done–called for a reduction in actual loan amounts in order to try and contain the current economic crisis.

“This situation,” said Bernanke, “calls for a vigorous response.”

Duh!

Let’s see why this might be, shall we?

The Fed Chairman himself is warning that mortgage delinquences and foreclosures are more than likely on the way up, not down.

In 2008, about one and a half million subprime loans with adjustable rates are slated to reset to higher rates.

Banks and other lending institutions continue to take a beating from what began as a mortgage crisis.

The stock market is more depressing than a White House position paper.

Oil and now gas prices are rising to levels not seen since the 1980s–and, adjusted for inflation, are actually higher now than before.

So, no wonder the government–even this one–is really getting worried now. Finally.

Which brings us to Bernanke’s proposal: “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foresclosure,” he says.

Talk About Tough Sells

Asking lenders to actually write down principal is a bit like asking a very hungry lion to take a pass on a big chunk of fresh meat.

But, Bernanke may have hit upon at least part of the solution to this growing problem.

And, then, too, there is the animosity factor to consider. People who took out mortgages they could afford may really get angry if those who took out mortgages they couldn’t afford walk away from the table with lowered principal!

Some hard decisions clearly must be made. But, do our politicians in Washington have the guts to make these decisions? D.C.’s record can not offer encouragement on this front, yet, there does seem to be a growing recognition that we are in the middle of a global, largely U.S. caused, economic mess. This calls for emergency measures that would have been unthinkable in this country just a few months ago.

Tags: Ben-Bernanke, federal reserve chairman, Foreclosures, principal, subprime mortgages, The Fed

If the announced planned merger of Bank of America and Countrywide Financial Corp goes through, BofA will be involved in about one in every four mortgage loans in the United States.

One in four!

Now one way to look at this is, this is a good thing. It will probably rescue Countrywide -described by the New York Times as, “the troubled lender that became a symbol of the excesses that led to the subprime mortgage crisis.”

Another way to look at this is bad…bad news for the U.S. economy and one of the biggest signs to date just how fast it is sinking beneath a tidal wave of For Sale signs.

Why?

Because the head of BoA ,Kenneth Lewis, has been quoted as saying that, although his bank always wished to be a much bigger player in mortgage banking, he wouldn’t even think of buying up another mortgage lender, such as Countrywide, “until blood is running in the streets.”

Guess the blood has started to gush enough to get Bank of America’s interest.

Meantime, the damage done by the subprime mortgage fiasco just keeps getting worse with no end in sight.

The head of the Federal Reserve is now painting a really bleak picture of the economy, a real about face from only a few months back.

Says Ben Bernanke, “The outlook for real activity in 2008 has worsened.”

With that very much in mind, Bernanke has suggested that the Fed might make yet another, bigger cut in interest rates and real soon.

That’s good, because American consumers are not exactly happy campers right now.

The biggest retailers in the nation are saying that their holiday sales gains are weaker now than any time in the past five years.

But even that may be too little and much too late, which may force Congress to step in and do what it always tries to do when capitalism runs amok: slap government controls on parts of the economy.

Remember how when word of the subprime mortgage problem first really got the attention of the public and news media, it seemed a somewhat localized problem with a quick fix provided by slightly lower Fed rates the obvious answer?

Well, forget that. This has turned into a global credit crunch leading to the forced resignations of some banking and mortgage lending giants’ chief executives, not to mention the almost certain prospect of tens of thousands, if not millions, of homeowners on the cusp of foreclosure.

So, I say, bless Bank of America for buying the United States. Heck, it might as well snap up Canada and Mexico while it’s at it.

That way, if nothing else, everyone will save on those nasty ATM fees cause we will all be customers of Bank of America one way or the other.

Bank of America, Countrywide, subprime mortgage, economy, Bernanke, credit crunch

Tags: bank of america, Ben-Bernanke, countrywide financial corp, federal reserve, The Fed

Here’s a quote that should make everyone feel better this holiday season. It’s from the chief domestic economist at Morgan Stanley and is in a report to clients as reported by the New York Times.

“A mild recession is now likely, with no growth for the year ahead.”

Great.

And, based on what the Federal Reserve just did–cutting a key short term interest rate another quarter of a point down to 4.25 percent–I’d say the Feds are finally getting as worried as most of the rest of us already are.

If that is not bad enough… there was disagreement among some Board members…one was not happy at all by the decision to lower rates. He thought it should have been lowered even more, a full half-point chop.

When Board members start arguing amongst themselves over how dire things really are and how much Federal intervention may be needed, you know it is time to start looking around to make sure you’re near a lifeboat before the ship sinks.

According to the Times report, both Ben Bernanke, the Fed chairman, and Donald Kohn, the vice-chairman, have, in recent days, “expressed concern that subprime mortgage problems might be making banks and other lenders reluctant to lend not only for housing but for other activities as well.”

Really? No kidding guys?

So, how bad are things in subprime land right now? For the last three months of this year, the growth of our economy appears to have sunk to maybe 1 percent. This is not good news, folks.

Want more bad news? Well, of course not, but you might as well get it anyway seeing as it’s your economic future that is at stake: Housing sales and prices are now down just about all over these united states–the subprime mess having grown like a cancer from a problem for the two coasts to a problem for us all.

But, perhaps the biggest indication of just how concerned the Fed is, is this fact: It has lowered the short term interest rate for the third time now in just about four months. Needless to say, after each reluctant cut, the Fed felt confident enough that it had done enough to keep the ship of state afloat. Guess what guys, the water is already over the deck and rising in many places and for many people.

We have also been “treated” to the great plan that President Bush said he had to help out many who face the real prospect of becoming homeless just in time for Christmas. Problem is, hardly anyone who has taken a closer look at the “plan” thinks it will work.

For one thing, hardly anyone will actually qualify to have his adjustable rate mortgage frozen for the next five years or so because the guidelines raise the bar so high, most people would have to cut their heads off and hold it with arms stretched skyward to reach it.

And then, there is this: The whole damn thing in all voluntary anyway. Meaning, no bank or lending institution has to do anything if it doesn’t feel like it. Great plan!

So,now what? The truth is, no one actually knows because we haven’t gone down this particular road before. That means you must take every “expert” opinion you read or hear with a boulder of salt. Wall Street doesn’t know what will happen next. The presidential candidates, Republican and Democrat alike, don’t know. Academics don’t know. The Federal Reserve doesn’t know. We may all be in this together, but sure would be nice if someone at least brought along a flashlight.

Tags: Ben-Bernanke, donald kohn, federal reserve, Interest Rates, mortgage crisis

The President and others in office continue to tell us how well our economy is doing. Lets take a look at some of the latest news to see how things are really doing . . .

Today, according to Breitbart.com, the Federal Reserve added 31.25 billion dollars in temporary reserves to the US money markets Thursday in three different operations, the latest move to keep credit markets from drying up.

The New York Fed added 7.0 billion dollars in 14-day repurchase agreements, 16 billion in seven-day repurchase agreements and 8.25 billion in one-day repos. The Fed has injected some 200 billion dollars into the financial system since August 9 in a bid to boost credit flows which have seized up due to problems linked to the distressed US mortgage market.

Does it sound like things here in the states are healthy??

I look at phrases like “credit flows which have seized up due to problems linked to the distressed US mortgage market” and “the latest move to keep credit markets from drying up” as bad signs, don’t you?

So, thanks to the Mortgage Disaster, the fed has now pumped $200 BILLION dollars into the economy to keep it afloat . . . I’m not quite convinced by the argument that we’re in for a smooth sailing economy.

To further my sinking feeling about things, the Mortgage Bankers Association released a report today, stating that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high. Further, with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.

DAMN SPECULATORS!!!

As I’ve said in the past, while the economy is certainly weak, and the housing market continues to look bad, despite what the NAR and the Government say, this is the perfect time to learn about investing. There are opportunities presenting themselves everywhere in the country, and if you can learn how to capitalize on the foreclosure market, you can do quite well, even in this crazed economy and market.

Fed Chairman Ben Bernanke Announces Plan to Abandon Lenders and Investors

With that in mind, I thought it would be important to mention the words of Fed Chairman Ben Bernanke, who commented in a speech last Friday, the central bank is ready to cut rates if turmoil in financial markets starts spilling over to the general economy. But, Bernanke added, “it is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions.“

Interesting . . .
So the chairman doesn’t think the Fed should protect lenders or investors, even though the Government did nothing but encourage all of the activity that led to the current Housing-Mortgage-SubPrime-Economic Crisis.

Looks like we’re on our own folks . . .

Tags: Ben-Bernanke, bernanke, Bush, credit-flows, fed, federal reserve, foreclosure, Housing, Mortgage-Bankers-Association