Hank Paulson is not done asking for more authority to “rescue” us from the mortgage crisis. In his first round of legislative begging, he got Congress to pass The Housing Economic Recovery Act of 2008 which gave him the right to take over Fannie and Freddie putting taxpayers on the hook for their greed and mismanagement. Most insiders figure that will cost about $300 Billion after all is said and done.

But Hank is not done!

Now after this horrific week of every company under the sun coming to Washington hoping for a bailout, it becomes clear to Hank he must do something “bigger”. He decided to hold a press conference Friday to announce he was working on a comprehensive rescue package that would alleviate the “crisis” at it’s source…in Paulson’s own words,

“The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy. This troubled asset relief program must be properly designed and sufficiently large to have maximum impact, while including features that protect the taxpayer to the maximum extent possible.”

Well now some of the specifics are coming out as Hank goes to the Hill laying out his plan. Hank’s plan involves getting Congress to give the Treasury Department open ended power to buy, hold, and then sell any residential or commercial mortgage assets originated before September 17, 2008.

According the American Banker,

“As drafted, Treasury could use its power to buy far more than $700 billion worth of mortgage assets over time. The draft language only restricts Treasury to holding no more than $700 billion of mortgage related assets “at any one time.” If it sold some assets back to the private sector, even at a loss, it could continue to purchase more, observers said. That could continue to drive up the potential cost of the plan to taxpayers.

“The authority is broad and the $700 billion represents the total amount at any one time but there is not a cap on the total amount of assets that can be purchased,” said Scott Talbott, senior vice president for government relations at the Financial Services Roundtable. “It’s a revolving line of credit.”

Yikes!

Paulson wants to buy the all the “bad loans” on the books at every financial institution now…not just Fannie Mae and Freddie Mac. Congress rolled over the first time Paulson came to the Hill, but insiders don’t believe Congress, especially the Democrats, will be as cooperative this second time around.

American Banker reports,

“There are going to be some hiccups of this plan because it’s completely open ended — Wall Street runs this plan and there’s no help for homeowners,” said Howard Glaser, a mortgage consultant. “Congress will find it very troubling that the asset managers running this program will be asset managers hired by Treasury.”

This is getting ridiculous. It reminds me of Naomi Klein’s, “Shock Doctrine” theory of the current Administration to use a “crisis” either real or imagined to pass legislation which “the people” would never stand for without the crisis.

To me it seems Paulson is using the Shock Doctrine to get Congress to pass far reaching legislation which includes no help for home owners or protections for the tax payer.

I truly hope Congress doesn’t fall for it.

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Tags: fed, federal reserve, Henry Paulson, paulson, The Fed

Today I roll out my PMS – People’s Money System. Forget the drum rolls and forget the fanfare because once PMS infects your soul, you will be a different person.

Before I get into the specifics, I think you should visit this page because the author not only lays out what is already in the mill on foreclosure lawsuits but also presents a solution to the problem. I thought you should know I am not the only solution oriented town crier on the boulevard.

When I reread my last week’s post, I noticed I left out an important piece of information. I say important because of its source and because it is germane to PMS. The Federal Reserve Bank of New York publishes a pamphlet titled, “I Bet You Thought” which contains the following revelation:

“Money doesn’t have to be intrinsically valuable, be issued by a government, or be in any special form.”

The phrase, “be issued by a government” implies, in our case, Washington, D.C. If you are in the least bit familiar with the Constitution you know we the people granted Congress the authority to make our money. We never gave them the authority to delegate that power to a foreign entity or any entity for that matter.

That means, if I am correct, we can revoke their money creating power when we believe our best interest is not being served. But, you have heard these arguments before and not paid much attention for various reasons.

However, as you read this post your economic situation may have been altered and may be even radically changed for the worst. You now want a way out of your predicament and are willing to readdress the fact that you are the government. The folks in D.C. are called representatives because they are just that and nothing more.

Now it is time to revoke their misused power and start issuing our own currency. I hope you read the CAFR material as CAFR assets are what will back PMS. Theoretically, we will never deplete this collateral because the agencies fiscally operate under an annual budget and the CAFR is fed through the budget year after year after year.

We will also use for collateral the bonds every government office holder is supposed to have in place before he/she takes office. This one is a bit tricky as almost every level of government in existence today has formed risk management pools with one or more levels of government in one or more counties within their state.

We will get around this sleight of hand by simply using the bond’s legislatively determined face amount as the true amount of collateral. Attaching this collateral and transforming it into PMS will be easy as every office holder has committed at least offense while serving.

This offense can be as minor as violating the open meeting laws. If we use Mike Nifong as an example of the most egregious type, the 3 people he wronged can use his entire amount as collateral behind their PMS certificates.

In fact, these will be very strong certificates because not only will his bond amount be attached but so will his paycheck, retirement account, bank account and any other asset he may own. My thoughts say even his medical policy can be attached.

Since I know you are intelligent, I’ll move on with my PMS as you can figure out how to utilize our representative’s collateral as PMS. You attach it and make it yours by filing a UCC-1 (or maybe another type of document) against that or those public figure(s) who have committed transgression(s) against you.

You not only file against their bond but their paycheck, retirement account, home, car and everything else they own. Remember they are public figures. Violation of their fiduciary duty as delineated in their oath of office to their principals (you and me) makes everything they own subject to attachment.

Note: For those wanting a short course on principal/agent relationship, please read that particular section in the California Codes. CA does a great job of laying it out for an easy read.

Let’s look at your paycheck and convert it into PMS. This deposit is a deposit of credit and not of cash. It is done electronically therefore no one ever sees any cash. Some people never use cash as they operate under a full credit, non-cash, type system.

They write checks use their credit or debit cards and if any cash falls into their hands it is residual as a result of a transaction in which they got cash back. Yes, I know, everyone else writes a check in order to obtain cash.

That’s wonderful because nothing will change under PMS. You can write a check so you have some PMS in your pocket just like you do now. Or, you can be on a complete PMS free system and write checks to pay bills and buy goods, food and trinkets.

Your balance at the bank won’t change. If your company deposits $3000 a month, it will still deposit $3000 a month. The only difference is the $3000 will be PMS units and not FRN units.

The PMS units will be backed by real assets. The PMS will have real value and not contrived value.

How do we convert your FRNs into PMS units? Easy, we simply translate your present deposits in all of your accounts into PMS units on a one for one basis. If you have $2,000,000 in your account, it will be $2,000,000 PMS. One for one.

What will be the office that does the bookkeeping to be sure only real PMS units are circulating? Another easy answer. Your present banking/financial institution with the present Federal Reserve functioning only as the national bookkeeper.

Who will print the PMS certificates? The same printer who prints the FRNs.

What will it look like? Pictures of dead presidents can adorn PMS certificates since we seem to like that style of bill. The PMS will also have numerical denominations so we will know what amount we are receiving.

Will it be accepted? Are you kidding, of course it won’t be but it is a great system that will re-introduce true value into the nation’s monetary system.

Maybe the real benefit is it will not only reduce the Federal Reserve to bookkeeper (its only role in my opinion) but make it the guardian of the people’s assets. This behemoth of an agency has enjoyed a free ride for too long and now should be harnessed to execute the type of manual labor it truly was designed to perform.

Are there some holes in my proposal? A few but none that can’t be worked out by some talented finance/economic oriented minds populating our universities and think tanks. Heck, I hope some BP members step up and run with it.

Tags: currency, Economy, federal reserve, foreclosure, money, rederal reserve note

Alan Greenspan, the controversial former Fed Chairman, in an interview by the Wall Street Journal’s David Wessel gave us a few pearls of wisdom to ponder about the state of the housing market.

He starts out with a prediction calling for a stabilized market by summer of 2009. Greenspan admits depending on the size of the bubble certain location will see continued price declines after his deadline. But for the majority of markets, a never-ending price depreciation will end about a year from now…and I happen to agree with him on this point.

Denver, where I live, was first into the bubble (a smallish bubble at that) and will be the first out. We are already seeing signs of this as the Case-Shiller Index for Denver was up for 2 months in a row in May and June. However, Phoenix, Las Vegas and other markets like them were late to the bubble party and saw bigger price appreciation, so they won’t hit Greenspan’s target but will follow soon after.

Greenspan bases his prediction on supply versus demand statistics as well as rent versus own price corrections. He states it best by saying,

“It’s the imbalance of supply and demand which causes prices to go down, but it is ultimately the valuation of the commodity which tells you where the bottom is.”

He uses the current figure of 800,000 vacant homes and figures it will take a year to liquidate enough of those homes at lower and lower prices, that an equilibrium will be hit when investors feel the desire to hold on to the home rather than sell…put another way, when it costs more to rent than to own.

I like this dual methodology for analyzing the bottom in the housing market. Historically, home owners had to see a benefit from owning versus renting and landlords needed a premium to stay landlords. Greenspan knows a “corrected” market will return us to that state. He also informs us the number of households created in a year in the US today is 800,000…the same number as vacant homes, so the supply/demand component is covered too.

If prices could drop fast enough to make a mortgage payment less than rent for the same house…violia…the bottom is reached.

He warns against too much legislation, tax incentive, or bail out activity which could slow the speed in the drop of housing prices. Subsequently, he voiced he dissent on the GSE bailout by saying,

“They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted — with necessary taxpayer support to make them financially viable — as five or 10 individual privately held units,”

Greenspan fears a huge taxpayer bill coming due for Fannie Mae and Freddie Mac thanks to Hank Paulson’s new law…and I share his concern.

Wow…I agree with Alan Greenspan a lot here…I’d better go lay down.

Tags: Alan Greenspan, fed, federal reserve, The Fed

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.

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

Recently somebody said, “Hey, you lost weight,” and I said, “Yeah, thirty-five pounds and three and a half billion dollars.” So I’m quite a bit lighter and more flexible than I was.” - John Malone

Greetings from the metropolis of Cedar Crest, NM.

Friday evening, I was watching CNBC when the news broke out about the IndyMac Bank seizure. I was in shock. I just got to a peaceful place….well…not really peaceful…but a place of “acceptance” (for a lack of a better word) in regards to the unavoidable bailout of Freddie Mac and Fanny Mae. Now this?

Doing some quick research, this is the FIFTH FDIC failure of the year. Fifth!!! And guess what….we are not done. Based on what the experts are saying (…just pick one of your favorites), not only has the “fat lady” not started to sing yet….from my understanding….there are a lot of fat ladies and they all have a lot of singing to do.

Although this was expected (not specifically IndyMac but obviously Freddie and Fanny), the reality of it all is still surprising. I guess it is still surreal to me.

I have written a lot in my own blog about how to invest in a tumultuous economy….so I was very aware of the prognostications by many experts regarding the future of the economy. One particular opinion stood out….Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University’s Stern School of Business.

Back in February, I wrote a post that discussed Glenn Beck’s “DEFCONOMY” scale regarding the “worst-case scenario” forecast of the economy. This DEFCONOMY scale is based on Nouriel Roubini’ s “twelve steps to financial disaster.”

Based on Beck’s DEFCONOMY definitions….I think we have met the requirements of DEFCONOMY 3….and well into DEFCONOMY 2. According to Roubini, in DEFCONOMY 2, we will see “Most forms of credit become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.”  Roubini also states that “…credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.”

Now…DEFCONOMY 1….according to Roubini is “A full economic meltdown.”  In other words, “The Great Depression has arrived.”

I doubt DEFCONOMY will ever materialize.  Too much has to happen…..but then again….what do I know?

There is my “feel-good” article for the week…..until next time……rob

Tags: Credit, Economy, federal reserve, housing, real estate, Real Estate Market

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

I would bet every reader of this blog has heard of Mark Twain. On the other hand, I would bet I’m probably the only person on this blog familiar with Craig et al v. The State of Missouri. This article gives quite a bit of insight into Samuel Clemens. Please read it before you read the rest of this post.

I suggest you read the article because you will undoubtedly recognize a good number of today’s “events” in references from quoted Twain writings. It seems not much has changed in the 100+ years Twain put pencil to paper.

You don’t need to read the Craig case. I’ll summarize it in a sentence or two. The U.S. Supreme Court was deciding an appeal from a case in Missouri in which Craig claimed the issuance of bills of credit by Missouri violated the Constitution. Should you decide to read the case, simply put it in your favorite search engine. If you do, you’ll see the court decided in favor of Missouri.

Also, you will get quite an education on paper money and its (il)legality. If you would like more information on how wide spread this idea of emitting bills of credit has become, I suggest you read this article.

To put it all in perspective, at least according to me, I’ll quote Thomas Jefferson:

“What has destroyed the liberty and rights of man in every government that has ever existed under the sun? The generalizing and concentrating of all cares and powers into one body, no matter whether of the autocrats of Russia and France or of the aristocrats of a Venetian Senate.”

I didn’t write this post to even suggest I’m some sort of brain child or have all the answers. I wrote it because

I saw this headline the other day — Fed plans new rules to protect future home buyers. Where in the hell did the Federal Reserve get the authority to step into housing? It just so happens the answer is in a paper written by Sterling E. Edmunds of the St. Louis Bar. His paper is titled: The Roosevelt Coup D’ Etat of 1933-40

Chapter VII is titled: The End of the Cycle of Constitutional Freedom for the American Citizen. Scary, this freedom snuffing activity by the government.

If you decide to research any of the above referenced material, let me know if you think it pertains to today’s events. I’d like to hear your thoughts on the validity of it being the ground work for those of us experiencing its aftermath.

Tags: federal reserve, history, housing, mark twain, politicics, The Fed