During the Clinton years, it was, “it’s the economy, stupid!” Now, without doubt, “it’s the mortgages, stupid!” Without a major fix, the global economic meltdown, most experts say, will only grow worse.
And, if you think that is not possible, just check out the value of GM shares! They’re so weak, you can almost trade in your current GM vehicle for the entire company!

Individual banks have been lining up to announce they have come up with plans to help people who are on the verge of foreclosure. These plans don’t go far enough or help enough people.

The Government announced yesterday, a “plan to ease mortgage payments for troubled borrowers through finance giants Fannie Mae and Freddie Mac,” according to Reuters.

But even this is probably not enough.

A New York Times report paints a stark and scary picture of the housing situation in the nation at the moment. The article quotes a real estate data company’s findings that 7.6 million homes in the U.S. are “underwater” (the new term for negative equity)–and more than 2 million more are about to fall off a cliff.

And, one poor California town, Mountain House, has the dubious distinction of having about 90 percent of all its homeowners owing more on their mortgages than the actual worth of their houses!

Clearly, the government must do more…a lot more…to stop these homeowners from, understandably, walking away from their devaluing homes.

The solution will by its very nature be unfair to those who borrowed wisely and are continuing to pay their mortgages. But, when a town has 90 percent of its home owners in negative equity–with more towns to surely follow–fairness becomes less important than being practical.

Whether you voted for Barack Obama or not, you have to almost feel sorry for the guy, taking office with the expectation that he will save the U.S.—the world—from further economic ruin.

A new AP poll just out shows 7 in 10 people–an amazing 72 percent– “voice confidence the president-elect will make the changes needed to revive the stalling economy.” 44 percent of Republicans reportedly feel the same way!

But “Superman” doesn’t fly into Washington to save the nation till January 20th and many bad things can happen till then.

That is why Bushman, if he has any sense of legacy, will use the same awesome executive powers he used to subvert the Constitution to help jolt the economy.

A lame-duck Congress was a possibility…but leaders there don’t feel much like calling one if Bushman is going to stand in the way.

As the saying goes—-lead, or get out of the way! That’s a hint, George.

Photo Credit: DifferentObamas

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Tags: fannie, foreclosure, foreclosure rescue, freddie, housing rescue, mortgage, paulson

Of course Congress had to wait till October to pass the $700 billion socialization of the American economy: October is, after all, the month best known for the Bolshevik revolution that brought Vladimir Lenin and gang to power in Russia.

How fitting, then, that the Senate and then the House will no doubt approve a measure that will have taxpayers bailing out bankers and putting the U.S. government into the business of running banks and mortgage houses (of course, it already does so with Fannie Mae and Freddie Mac and AIG.)

No one seems to be talking about the hidden cost of going from school to school and library to library to purge them of ancient texts that actually refer to the United States as having a free market place.

One thing that should by now be readily apparent: this crisis is really not about subprime mortgages and really never was. It is about the invention of a alternate banking system that was not regulated or really supervised in any way…a system that operated at a level of greed and probable criminality the likes of which we haven’t really seen in this country since the days of the robber barrons.

And, guess what? The robbery is still ongoing! Of course the bailout will end up costing $700 billion and probably more, even though we are being told it is unlikely to in the end.

Of course taxpayers won’t get their money back. Of course the proposed limits on executive pay will be worthless; companies will skirt this by just paying executives more with things such as stock options in place of straight salary, thus getting around the rule (provided it passes, of course.)

If Lenin weren’t so waxed lying in state in Red Square, he’d be smirking at what is happening in the U.S.

But as the great-grandfather of the October Revolution, he would certainly understand.

Tags: $700 billion, bailout, fannie, freddie, housing bailout, mortgage bailout, paulson

In a move that should surprise no one, the FBI, says CNN, has opened an investigation into Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc., and American International Group, the four companies now at the very heart of the proposed $700 billion dollar theft–I mean taxpayer bailout–plan being pushed by Bush and gang in Washington.

This apparently brings to 26 the number of financial insitutions under law enforcement scrutiny just in the past year.

CNN quotes two law enforcement officials as saying the FBI is looking for “potential fraud” by the four giant and now collapsed companies.

Faster, Faster, Faster

Meantime, perhaps the FBI should also take a closer look at why the Bush administration is in such a hurry to ram through the Congress this enormous rip-off of the American taxpayer in order to rescue some fat-cat Wall Street big wigs who drove their companies and the U.S. economy into the ground.

We are being told we must act quickly…yesterday if possible. Don’t ask any questions. Don’t provide oversight. Don’t permit judicial review. Don’t hold hearings. Don’t consult experts. Don’t hold anyone accountable. Just hand the $700 billion over to the very sleeze bags who brought the country to its fiscal knees.

Don’t help people who face forclosures. Don’t limit executive pay for the CEOs of failed companies. Don’t attach amendments to increase unemployment insurance. Don’t change the bankruptcy laws to allow judges to change the terms of a mortgage to help keep someone in their home.

No. Don’t do any of these things. Just fork over the greenbacks. Sign the big check. Shut your mouth. Close your eyes. Plug your ears. And, while you are at it, hold your nose because the stench from this crap will burn through your throat.

Recently, China executed some key industry executives who were responsible for tainted products being exported to other countries, tarnishing China’s still developing reputation.

Maybe China is on to something? The Chinese, after all, brought us citrus fruits, gunpowder, paper, fireworks and now, corporate executions. Isn’t there something to be learned,then, from the Chinese when it comes to dealing with this financial crisis??

Tags: AIG, fannie, FBI, fraud, freddie, lehman, mortgage-fraud

This is an election year. That may seem like a tremendous grasp of the obvious but I wish to ask you to look behind that statement so you can see what is happening right in front of your eyes.

What I am really interested in is the Freddie/Fannie bailout. My God, the impact is almost too much to grasp. However, the part I grasped is summed up by a fellow named Jim Rogers in these quotes:

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is “more communist than China right now” but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday (9-08-08).

“This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I’m not quite sure why I or anybody else should be paying for this,” Rogers told “Squawk Box Europe.”

I submit Rogers is dead wrong when he says the U.S. is “more communist than China right now” because I believe the U.S. has been communist for over 50 years and there is no such thing as “more” communist. Communist is communist in my eyes.

Tell me who wrote the following statements:

1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all right of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
6. Centralization of the means of communication and transport in the hands of the State.
7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
8. Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.
9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equable distribution of the population over the country.
10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, etc.

The author really doesn’t make much difference, right? Right, espeically since those 10 statements accurately reflect our life structure in 2008.

Should you need help in understanding some of the above statements, I suggest you read the Patriot Act while taking a close look at the government agencies in charge of labor, transportation, communication, agriculture, pharmaceuticals, education, taxes, banking and welfare.

Unless I’m full of beans, all 10 planks have been entrenched in our system for at least 50 years. We have even, at times, lobbied the “government” to make them laws. Naturally they complied. It is easy to pen the sheep when the sheep want to be penned.

What Mr. Rogers failed to expound upon, other than a mention of nationalization, was the extent of the federalization of the housing market. It is happening before our eyes and with our approval. The only thing we complain about is the CEOs of Frannie/Freddie absconding with extra large severance packages.

We are missing the action happening behind the scenes in this election year. I submit that is by design.

I happen to like investing in housing and using my knowledge to not only make a few bucks but help those who actually want help. The money is wonderful but so is the feeling of seeing someone keep their home and not be put on the streets.

As the feds continue to steam roll through this arena, homeless camps will become as common as stop signs and red lights. For the non-believers, read the 10 planks one more time.

[As a side note, I mentioned my son in one of my previous posts. His girl friend is from Warsaw. On one of his visits to her home, he met her grandfather. Grandpa spent 5 years in a Communist slave labor camp. All of his properties and belongings were confiscated by the authorities prior to his incarceration. Re-read plank 4 and 12 USC 95(a) and then tell me it can't happen here.]

The time table has been accelerated as evidenced by the gargantuan leap in the federal debt as a result of the Freddie/Fannie takeover. A debt burdened populace becomes powerless to mount any meaningful resistance. Ask the last Roman standing in the final days of “the” empire.

I don’t know about you but the election facade doesn’t leave me with a warm fuzzy feeling.

Tags: election, fannie, fannie mae, freddie, freddie mac, housing, mccain, obama

The imminent failure of both Freddie Mac and Fannie Mae has already begun to have a detrimental impact on the larger US economy and the ability of home buyers to finance the purchase of a new home.

This is an unfortunate circumstance for many young families who may not be able to qualify for a mortgage to purchase their new home because of tighter bank underwriting guidelines. While this is a negative situation for young families looking for their own homes it could be a potential wind fall for the owners and operators of apartment building complexes across the United States. All of the people displaced by the housing bubble along with new populations of young people looking for housing will have to turn to rental properties for housing. The fact that more and more residential, single family homes are entering into foreclosure should also further diminish the available supply of rental units on the market.

When a home is in foreclosure or bank owned it can’t be rented and it sits as an empty, unavailable property. For example, on the residential street where I live in Fort Lauderdale there are 3 or 4 houses on one block that appear to be completely abandoned and in some stage of foreclosure or bank ownership. No one can rent these homes because they are bank owned and waiting for a buyer. Meanwhile the prices of homes in the neighborhood are still priced well above the ability for most working families to afford, especially considering the difficulty many are experiencing when searching for an affordable mortgage.

The obvious choice for many young families and those displaced from their homes because of foreclosure is to find a rental property to live in while saving money for the future purchase of a single family home. With the expected decline in available rental homes available on the market due to bank ownership many families and young people will be looking to apartment buildings for housing. This increase in the number of potential renters comes just at a time when the construction of multi-family buildings has begun to decline.

The decline in the construction of new apartment buildings is due to the fact that many banks and real estate financiers are cutting back on new construction projects nationwide. They are unwilling to take the risk of funding new construction during a time when residential real estate prices are dropping rapidly. According to the Associated Press, the “Standard & Poor’s/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.”

It remains to be seen what impact the decline in availability of rental properties will have on the rental rates for major metropolitan areas.

Tags: apartment building vacancies, apartment investing, Economy, fannie, Fannie & Freddie Mac Loans, freddie, freddie mac, rental vacancy

In a clear sign the federal government is far more concerned about the financial health of mortgage finance giants Fannie Mae and Freddie Mac than its public comments indicated as late as Friday, the U.S. government Sunday night announced what some are calling a “massive aid” package to the two shareholder owned and run companies officially cementing a government relationship that till now was only implied but never admitted to.
According to a Reuters dispatch, the plan, which will require swift approval from Congress, is designed to “head off a potential meltdown in financial markets.”

Here’s what the government is offering Fannie and Freddie:

1. Access to its emergency cash–the so-called discount window
2. A huge “temporary” increase in the line of credit available
3. The U.S. Treasury will, for the first time ever, purchase equity in both companies should it be needed
4. Investigation by the Securities and Exchange Commission to stop the spread of “false information.”

Both Fannie and Freddie are vital to the housing market–they buy mortgages from banks and other lenders and either keep them or repackage them into securities that are sold to investors.

“Welcome to the socialist state”

Strong words from some critics are already greeting the government plan. Josh Rosner, the managing director at Graham Fisher in New York told Reuters, “It’s outrageous. It’s offensive. Welcome to the socialist state. In capitalism, winners are supposed to reap rewards and losers are supposed to take losses for bad risk management. These are private companies.”

But others are deeply concerned that should Fannie and Freddie fail–though they both say they are well capitalized–the shockwaves would cause a financial meltdown world-wide.

The most troubling part of the government plan,perhaps, is the possibility the Treasury might buy equity in Fannie and Freddie. Some critics charge this could end up costing taxpayers enormous sums of money.

It will be interesting to see whether Wall Street gives the plan a thumbs up or thumbs down during Monday’s trading.

Here are 2 more articles worth reading:

• Government as the Big Lender
• Treasury Acts to Save Mortgage Giants

Tags: bailout, bank, banking, fannie, fannie mac, fed, federal reserve, freddie, freddie mae, housing bailout, lenders, mortage, paulson, subprime

INDYMAC IS OFFICALLY CLOSED!!!

In the past minutes newswires around the country and world are now reporting that the Federal Government has shut down IndyMac Bank and has handed it to the FDIC (Federal Deposit Insurance Corp.) as conservator.

Couple the shut down with the Fannie Mae/Freddie Mac troubles, and we’re in for some really rocky waters next week. I’m willing to bet a lot of money that the announcement was held back from being made prior to the close of the stock market because of fears of a massive crash. Well . . . I think we’ll be seeing that happen this coming Monday!

Fasten your seat belts, people . . . we’re in for a ROCKY RIDE!

IndyMac Bank’s assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures.

The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.

Yahoo Finance

In the biggest bank failure of the housing downturn to date, federal banking regulators today closed IndyMac Bank FSB, naming the Federal Deposit Insurance Corp. as conservator.

The FDIC said it will transfer insured deposits and “substantially all the assets” of IndyMac Bank, to a newly created successor, IndyMac Federal Bank, which will be operated by the FDIC.

Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks. Depositors of IndyMac Federal Bank FSB will have no access to online and phone banking services this weekend, but will regain access to them on Monday.

Inman News

IndyMac Bancorp Inc. became the second-biggest federally insured financial company to fail today after a run by depositors left the California mortgage lender short on cash.

The Pasadena, California-based bank specialized in so-called Alt-A mortgages, which didn’t require borrowers to provide documentation on their incomes. Its home state has been among the hardest hit by foreclosures.

Bloomberg

What’s next? Anyone?

Tags: bank, bank collapse, bank default, fannie, fannie mae, freddie, freddie mac, IndyMac, subprime