Bank of America to Freeze Foreclosure Cases

DAVID STREITFELD

Published: Saturday, October 2, 2010 at 6:01 a.m.
Last Modified: Saturday, October 2, 2010 at 5:09 a.m.
( page of 4 )

Bank of America, the country’s largest mortgage lender by assets, said on Friday that it was reviewing documents in all foreclosure cases now in court to evaluate if there were errors.

It is the third major lender in the last two weeks to freeze foreclosures in the 23 states where the process is controlled by courts.

But Bank of America went further than the first two lenders, GMAC Mortgage and JPMorgan Chase, which have said they will amend paperwork only in cases they think were improperly done. So far, that has amounted to only a handful of cases.

Bank of America, in an e-mailed statement, said it would “amend all affidavits in foreclosure cases that have not yet gone to judgment.”

That could mean tens of thousands of foreclosure cases would be in limbo for months or, if the consumers in default hire lawyers, years.

Spokesmen for the bank said that they were uncertain how many cases the lender currently had in court. They provided no timeline or explanation for the freeze, saying only that the bank planned to eventually resubmit all the cases.

The moratorium is likely to further fuel the uproar over the foreclosure tactics of the big lenders, which continued to have political ramifications on Friday.

Before Bank of America’s announcement, Richard Blumenthal, the Connecticut attorney general, asked judges in his state to put a halt to all foreclosures for 60 days. Connecticut is one of the 23 states where foreclosure is a judicial matter. Others include Illinois, Florida, New Jersey and New York.

Mr. Blumenthal, who is running for senator in Connecticut, said the freeze “should stop a foreclosure steamroller based on defective documents and enable effective remedies.”

California’s attorney general, Jerry Brown, said that Chase should stop any foreclosures in the state until it proved that it was following the law. Mr. Brown, who is a candidate for governor, earlier made the same demand of GMAC.

In California, lenders generally pursue foreclosures outside of the court system, so they are presumably still proceeding with evictions. Chase declined to say whether it would comply with Mr. Brown’s comments.

Chase said this week that it had frozen 56,000 foreclosure cases. GMAC, which is largely owned by the Treasury after receiving $17 billion in federal bailout money to prevent its collapse, has repeatedly declined to say how many cases it is halting.

The nation’s two other major lenders, Citi and Wells Fargo, have issued statements maintaining they have no problems with their cases.

The problem for all the lenders that have announced moratoriums stems directly from their attempt to deal with an unprecedented number of foreclosures.

According to LPS Applied Analytics, a mortgage data firm, 2 million households are in foreclosure. Another 2.37 million households are seriously delinquent and waiting for their lender to take action.

Sometimes these loans are still owned by the lender but often, the banks are merely the loan servicer acting on behalf of the owner. Many of the loans are owned by Fannie Mae and Freddie Mac, the mortgage holding companies now controlled by the Treasury. In other cases the loans have been sold to private investment pools.

Confronted with so many cases, the lenders tried to process them on a wholesale basis, with the goal of avoiding the expense of a full trial and instead getting summary judgments.

The tool for doing this was the so-called robo-signers, in which midlevel bank executives would sign thousands of affidavits a month attesting that they had personal knowledge that the facts of the case were as presented. The affidavits were prepared by lawyers who were paid a flat fee, which also placed a premium on volume.

When defense lawyers started deposing these robo-signers, they acknowledged that they could not possibly have knowledge of all the cases. The banks say this is a technicality and they will refile the proper affidavits. The defense lawyers say the practice calls the cases, and indeed the entire process, into question.

Thomas Lawler, a housing economist, said the current mess was predictable and probably inevitable. Lenders made their money by making loans and then simply and efficiently servicing them by collecting the checks every month. They were never prepared to deal with the labor-intensive problems of delinquency and foreclosure.

“However, the foreclosure crisis is now almost three years old, and not having staffed up sufficiently to deal with the problems with inadequate staffing borders on criminal,” Mr. Lawler said. “I mean, jeepers, look at the unemployment rate; how hard would it have been to hire more folks?”

Mark Stopa, a Florida lawyer who represents defaulting homeowners, said the magnitude of the current troubles depends on how title insurance companies react. If those firms begin to shy away from insuring foreclosed properties because they think those properties are vulnerable to claims, he said, the entire housing market could suffer.

“Judges have to force banks to do foreclosures correctly,” Mr. Stopa said. But he noted that would require a significant increase in staff. “I’ll believe it when I see it,” he said.

Stocks of the major title insurance companies dropped on Friday amid concern that their business would suffer as a result of the foreclosure freezes. Fidelity National Financial fell more than 4 percent, while First American Financial dropped 3 percent.

One firm, Old Republic National Title, said this week it would not issue policies on GMAC foreclosures until further notice.

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Fannie Mae and Freddie Mac shares soar

But a banking analyst is puzzled by the stock market's reaction after the government in effect gave the mortgage giants blank checks of federal support.

December 29, 2009By Tom Petruno

Speculators poured into shares of Fannie Mae and Freddie Mac on Monday, the first day of trading after the Obama administration in effect gave the companies blank checks of federal support.

But exactly how the government's move makes a payoff for Fannie and Freddie shareholders more likely in the long run, rather than less likely, ought to puzzle most investors.

The stock market's reaction mystifies veteran banking analyst Bert Ely at Ely & Co. in Alexandria, Va.

"They're not going to get anything back," he says of any investors who have long-term faith in the mortgage giants' shares.

Of course, "long term" for most people trading these two stocks probably means an hour or so.

Freddie's shares jumped 34 cents, or 27%, to $1.60; Fannie's stock gained 22 cents, or 21%, to $1.27. Trading volume for both was the highest since late October.

The day's action was reminiscent of the speculative frenzy that erupted late last summer, when shares of Freddie Mac and Fannie Mae nearly quadrupled from the end of July to Aug. 28. During that four-week period, Freddie's stock rocketed from 62 cents to $2.40, while Fannie's shares soared from 58 cents to $2.04.

The Treasury on Christmas Eve announced that it was removing previously set limits on federal financial aid for the companies, which were seized by the U.S. in September 2008 amid mounting mortgage losses. The restrictions had capped aid at $200 billion for each firm. Freddie so far has tapped $51 billion and Fannie has used $60 billion.

The administration said it was removing the caps to "leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."

But whatever additional federal money flows into Fannie and Freddie would almost certainly come at the expense of shareholders' remaining stake. The government now owns 80% of both firms.

The administration is supposed to announce its long-term strategy for Fannie and Freddie in February. The companies' losses could continue to balloon if, as some analysts expect, the White House were to seek to use the companies to support new mortgage-forgiveness programs that would help struggling homeowners.

Ely points out another reason to doubt that the stocks have any real value: The pay packages the Treasury announced Thursday for the companies' chief executives consisted exclusively of cash compensation; no shares were offered.

In contrast, the Treasury has been requiring top executives of other large-scale recipients of federal aid to accept pay packages made up largely of stock and relatively little cash.

tom.petruno@latimes.com

Source:http://articles.latimes.com/2009/dec/29/business/la-fi-fannie-freddie29-2009dec29

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A year after financial crisis, a new world order emerges

AP – FILE - In this Sept. 25, 2008 file photo, a Wall St. street sign is shown in front of the American flag …

By Kevin G. Hall, McClatchy Newspapers Kevin G. Hall, Mcclatchy Newspapers – Tue Sep 8, 3:41 pm ET


WASHINGTON — One year after the near collapse of the global financial system, this much is clear: The financial world as we knew it is over, and something new is rising from its ashes.

Historians will look to September 2008 as a watershed for the U.S. economy.

On Sept. 7 , the government seized mortgage titans Fannie Mae and Freddie Mac . Eight days later, investment bank Lehman Brothers filed for bankruptcy, sparking a global financial panic that threatened to topple blue-chip financial institutions around the world. In the several months that followed, governments from Washington to Beijing responded with unprecedented intervention into financial markets and across their economies, seeking to stop the wreckage and stem the damage.

One year later, the easy-money system that financed the boom era from the 1980s until a year ago is smashed. Once-ravenous U.S. consumers are saving money and paying down debt. Banks are building reserves and hoarding cash. And governments are fashioning a new global financial order.

Congress and the Obama administration have lost faith in self-regulated markets. Together, they're writing the most sweeping new regulations over finance since the Great Depression. And in this ever-more-connected global economy, Washington is working with its partners through the G-20 group of nations to develop worldwide rules to govern finance.

"Our objective is to design an economic framework where we're going to have a more balanced pattern of growth globally, less reliant on a buildup of unsustainable borrowing . . . and not just here, but around the world," said Treasury Secretary Timothy Geithner .

The first faint signs that the U.S. economy may be clawing its way back from the worst recession since the Great Depression are only now starting to appear, a year after the panic began. Similar indications are sprouting in Europe , China and Japan .

Still, economists concur that a quarter-century of economic growth fueled by cheap credit is over. Many analysts also think that an extended period of slow job growth and suppressed wage growth will keep consumers — and the businesses that sell to them — in the dumps for years.

"Those things are likely to be subpar for a long period of time," said Martin Regalia, the chief economist for the U.S. Chamber of Commerce . "I think it means that we probably see potential rates of growth that are in the 2-2.5 (percent) range, or maybe . . . 1.8-1.9 (percent)." A growth rate of 3 percent to 3.5 percent is considered average.

The unemployment rate rose to 9.7 percent in August and is expected to peak above 10 percent in the months ahead. It's already there in at least 15 states. Regalia thinks that it could be five years before the U.S. economy generates enough jobs to overcome those lost and to employ the new workers entering the labor force.

All this is likely to keep consumers on the sidelines.

"I think this financial panic and Great Recession is an inflection point for the financial system and the economy," said Mark Zandi , the chief economist for forecaster Moody's Economy.com. "It means much less risk-taking, at least for a number of years to come — a decade or two. That will be evident in less credit and more costly credit. If you are a household or a business, it will cost you more, and it will be more difficult to get that credit."

The numbers bear him out. The Fed's most recent release of credit data showed that consumer credit decreased at an annual rate of 5.2 percent from April to June, after falling by a 3.6 percent annual rate from January to March. Revolving lines of credit, which include credit cards, fell by an annualized 8.9 percent in the first quarter, followed by an 8.2 percent drop in the second quarter.

That's a sea change. For much of the past two decades, strong U.S. growth has come largely through expanding credit. The global economy fed off this trend.

China became a manufacturing hub by selling attractively priced exports to U.S. consumers who were living beyond their means. China's Asian neighbors sent it components for final assembly; Africa and Latin America sold China their raw materials. All fed off U.S. consumers' bottomless appetite for more, bought on credit.

"That's over. Consumers can do their part — spend at a rate consistent with their income growth, but not much beyond that," Zandi said.

If U.S. consumers no longer drive the global economy, then consumers in big emerging economies such as China and Brazil will have to take up some of the slack. Trade among nations will take on greater importance.

In the emerging "new normal," U.S. companies will have to be more competitive. They must sell into big developing markets; yet as the recent Cash for Clunkers effort underscored, the competitive hurdles are high: Foreign-owned automakers, led by Toyota , reaped the most benefit from the U.S. tax breaks for new car purchases, not GM and Chrysler .

Need a loan? Tough luck: Many U.S. banks are in no condition to lend. Around 416 banks are now on a "problem list" and at risk of insolvency. Regulators already have shuttered 81 banks and thrifts this year.

The Federal Deposit Insurance Corp. reported on Aug. 27 that rising loan losses are depleting bank capital. The ratio of bank reserves to bad loans was 63.5 percent from April to June, the lowest it's been since the savings-and-loan crisis in 1991.

For all that, the U.S. economy does seem to be rising off its sickbed. The latest manufacturing data for August point to a return to growth, and home sales are rising. Indeed, there are many encouraging signs emerging in the global economy.

It's all growth from a low starting point, however, and many economists think that there'll be a lower baseline for U.S. and global growth if the new financial order means less risk-taking by lenders and less indebtedness by companies and consumers.

That seems evident now in the U.S. personal savings rate. It fell steadily from 9.59 percent in the 1970s to 2.68 percent in the easy-money era from 2000 to 2008; from 2005 to 2007, it averaged 1.83 percent.

Today, that trend is in reverse. From April to June, Americans' personal savings rate was 5 percent, and it could go higher if the unemployment rate keeps rising. Almost 15 million Americans are unemployed — and countless others are underemployed or uncertain about their job security, so they're spending less and saving more.

A few years ago, banks fell all over themselves to offer cheap home equity loans and lines of consumer credit. No more. Even billions in government bailout dollars to spur lending haven't changed that.

"The strategy that was stated at the beginning of the year — which is that you would sustain the banking system in order that it would resume lending — hasn't worked, and it isn't going to work," said James K. Galbraith , an economist at the University of Texas at Austin .

Over the course of 2008, the nation's five largest banks reduced their consumer loans by 79 percent, real estate loans by 66 percent and commercial loans by 19 percent, according to FDIC data. A wide range of credit measures, including recent FDIC data, show that lending remains depressed.

Why? The foundation of U.S. credit expansion for the past 20 years is in ruin. Since the 1980s, banks haven't kept loans on their balance sheets; instead, they sold them into a secondary market, where they were pooled for sale to investors as securities. The process, called securitization, fueled a rapid expansion of credit to consumers and businesses. By passing their loans on to investors, banks were freed to lend more.

Today, securitization is all but dead. Investors have little appetite for risky securities. Few buyers want a security based on pools of mortgages, car loans, student loans and the like.

"The basis of revival of the system along the line of what previously existed doesn't exist. The foundation that was supposed to be there for the revival (of the economy) . . . got washed away," Galbraith said.

Unless and until securitization rebounds, it will be hard for banks to resume robust lending because they're stuck with loans on their books.

"We've just been scared," said Robert C. Pozen , the chairman of Boston -based MFS Investment Management . He thinks that the freeze in securitization reflects a lack of trust in Wall Street and its products and remains a huge obstacle to the resumption of lending that's vital to an economic recovery.

Enter the Federal Reserve. It now props up the secondary market for pooled loans that are vital to the functioning of the U.S. financial system. The Fed is lending money to investors who're willing to buy the safest pools of loans, called asset-backed securities.

Through Sept. 3 , the Fed had funded purchases of $817.6 billion in mortgage-backed securities. These securities were pooled mostly by mortgage finance giants Fannie Mae , Freddie Mac and Ginnie Mae . In recent months, the Fed also has moved aggressively to lend for purchase of pools of other consumer-based loans.

Today, there's little private-sector demand for new loan-based securities; government is virtually the only game in town. That's why on Aug. 17 , the Fed announced that it would extend its program to finance the purchase of pools of loans until mid-2010. That suggests there's still a long way to go before a functioning securitization market — the backbone of consumer lending — returns to a semblance of normalcy.


Source: http://news.yahoo.com/s/mcclatchy/20090908/pl_mcclatchy/3307834

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Remembering The 2008 Financial Nightmare

Remembering The 2008 Financial Nightmare

by Marilyn Geewax
September 6, 2009

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Richard Drew/AP

Timeline: A Year Of Financial Crisis


September 6, 2009


Politics and weather dominated headlines during the first week of September 2008. Sarah Palin made her national debut at the Republican National Convention, and Hurricane Gustav soaked much of the South.

But within days, the news had taken a drastic turn, as a series of stunning events paralyzed America's financial system and profoundly rattled the global economy. Stocks tumbled, and the credit markets short-circuited. Pale, frightened regulators, bankers and politicians tried haltingly to explain how they might avert an economic catastrophe.

The crisis had been long in the making. Home foreclosures had been rising at an unnerving rate for more than a year. Congressional efforts to contain the foreclosure mess had failed. By early September, investment banks were racking up huge losses tied to bad bets on mortgages. The whole housing sector was crumbling.

Read The Series Overview Read The Series Overview
Financial Crisis: One Year And Counting

Then the financial crisis hit with brute force. On Sept. 7, the federal government took over mortgage giants Fannie Mae and Freddie Mac. Separately, the board of Washington Mutual, the nation's largest savings and loan, fired its CEO because of massive mortgage losses.

On Sept. 14, a Sunday, an apparent free fall began. Bank of America announced that it would buy the collapsing Merrill Lynch to save it. But there was no saving Lehman Brothers that day. The once-mighty global financial-services firm, founded in 1850, was crushed by its massive debts and the unwillingness of the government to guarantee its survival.

Trying to bring calm before markets opened the next day, the Federal Reserve enigmatically announced extraordinary measures it was taking, "including enhancements to its existing liquidity facilities." Whatever the words, the meaning was clear: Financial markets were freezing up.

The rest of the month played out with one nightmarish development following another. The Fed slashed interest rates and threw an $85 billion rescue plan at insurance giant AIG. Federal regulators seized the failed Washington Mutual and immediately sold it to JPMorgan Chase for $1.9 billion. The Securities and Exchange Commission banned short-selling of financial-sector stocks; Congress geared up for speedy passage of a $700 billion bank bailout that became known as the Troubled Asset Relief Program.

On and on went the scramble, and down and down went confidence. Commercial paper markets froze up. That spooked businesses that needed short-term loans to buy equipment and make payroll. So the Fed intervened there, too, to keep those markets going. Goldman Sachs and Morgan Stanley morphed into bank holding companies, putting an end to the glory days of investment banks. By month's end, the U.S. economy was plunging and plunging. And no one could tell how far it would fall.

In the coming days, NPR will revisit those nerve-racking days of just a year ago. We'll look at measures taken, the human toll and whether enough has been done to avert the next crisis.


Source: http://www.npr.org/templates/story/story.php?storyId=112573372

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Economists' letter spells out what went wrong

Last Updated: 7:13PM BST 11 May 2009

Dear Sir,
The prevailing view amongst the commentariat (reflected in the recent deliberations of the G20) that the financial crash of 2008 was caused by market failure is both wrong and dangerous. Government failure had a leading role in creating the conditions that led to the crash.

Central banks created a monetary bubble that fed an asset price boom and distorted the pricing of risk.

US government policy encouraged high-risk lending through support for Fannie Mae and Freddie Mac (which had explicit government targets of providing over 50pc of mortgage finance to poor households) and through the Community Reinvestment Act and related regulations.
Regulators and central bankers failed to use their considerable powers to stop risks building up in the financial system and an extension of regulation will not make a future crash less likely.
Much existing banking regulation exacerbated the crisis and reduced the effectiveness of market monitoring of banks. The FSA, in the UK, has failed in its statutory duty to “maintain market confidence”.
The tax and regulatory systems encourage complex and opaque methods of increasing gearing in the financial system.
Financial institutions that have made mistakes have lost the majority of their value. On the other hand, regulators are being rewarded for failure by an extension of their size and powers.
Evidence suggests that serious systemic problems have not arisen amongst unregulated institutions.
As such, no significant changes are needed to the regulatory environment surrounding hedge funds, short-selling, offshore banks, private equity or tax havens.


A revolution in financial regulation is needed. The proposals of the G20 governments and the EU are wholly misconceived. Specific and targeted laws and regulations could restore market discipline. These should include:

Making bank depositors prior creditors. This will provide better incentives for prudent behaviour and make a call on deposit insurance funds less likely.
Provisions to ensure an orderly winding up, recapitalisation or sale of systemic financial institutions in difficulty. Banks must be allowed to fail.
Enhancing market disclosure by ensuring that banks report relevant information to shareholders.
This should be reinforced with central bank action to ensure that:

Proper use is made of lender-of-last-resort facilities to deal with illiquid banks.
The growth of broad money is monitored together with the build-up of wider inflationary risks.

Yours faithfully,

Dr James Alexander, Head of Equity Research, M&G; Prof Michael Beenstock, Professor of Economics, Hebrew University of Jerusalem; Prof Philip Booth, Professor of Insurance and Risk Management, Cass Business School; Dr Eamonn Butler, Director, Adam Smith Institute; Prof Tim Congdon, Founder, Lombard Street Research; Prof Laurence Copeland, Professor of Finance, Cardiff Business School; Prof Kevin Dowd, Professor of Financial Risk Management, Nottingham University Business School; Dr John Greenwood, Chief Economist, Invesco; Dr Samuel Gregg, Research Director, Acton Institute; Prof John Kay, St John’s College, Oxford; Prof David Llewellyn, Professor of Money and Banking, Loughborough University; Prof Alan Morrison, Professor of Finance, University of Oxford; Prof D R Myddelton, Emeritus Professor of Finance and Accounting, Cranfield University; Prof Geoffrey Wood, Professor of Economics, Cass Business School.

Source: http://www.telegraph.co.uk/finance/financetopics/recession/5309591/Economists-letter-spells-out-what-went-wrong.html

Hands Out For The Bailout

HANDS OUT FOR THE BAILOUT



By Derry Brownfield
February 1, 2009

NewsWithViews.com

Everybody wants in on the act. The banks, the auto industry, even foreign banks think Uncle Sam’s money must grow on a tree somewhere on federal lands here in the U.S. It’s like writing a letter to Santa Claus and waiting for stockings to be filled. $700 billion to the “Troubled Asset Relief Program,” $200 billion to “Fannie Mae and Freddie Mac,” $29 billion to “Bear Stearns,” $123 billion for “AIG,” $300 billion for the “Federal Housing Administration Rescue Bill,” $87 billion for “JP Morgan Chase” for financing bad trades made by Lehman Brothers, the Big Three Auto Manufacturers have their hands out, and what about those poor bankers around the world?

We should give or loan the Central Banks of Canada, England, Japan, Denmark, Europe, Norway, Australia, Sweden, Switzerland, Brazil, Mexico, South Korea and Singapore a total of about $750 billion dollars. As I have stated many times, I was one of those unfortunate farmers back in the l980’s that couldn’t pay 20% interest on our farm loans. Farmers who had borrowed more money than their total assets were worth were foreclosed upon and the COMMITTEE FOR ECONOMIC DEVELOPMENT (CED) said: “this is a good thing.” The CED wrote a Statement on National Agricultural Policy in 1956, saying there were too many farmers and the inefficient ones should be eliminated. The policy statement said: “The movement of people from farms is important to the industrial sectors of the economy as well as to agriculture.” No bailout policy for financially strapped farmers was even considered.

Based on that philosophy, there are already too many banks and these inefficient banks should be allowed to fail, but this isn’t going to happen. Our government through the actions of the Federal Reserve will keep printing fiat dollars, and using the money to bail out failing banks, corporations, or even home owners, until the entire nation fails, due to our “debt money system.”

Unlike our Federal Government, if I personally had the money to bail out a failing corporation or any business that has allowed its executives to do stupid things and make stupid mistakes, I would call a meeting of the shareholders and let them know that if they want this bail-out they must fire those who have allowed the company to get into the financial mess. Oliver Cromwell was an English political leader, who in the 1600’s once told a group: “You have sat here too long for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!” They should “GO” without their last month’s salary and get NO benefits for leaving. But, that isn’t the way it works in this modern global society run by socialist politicians. AIG was in the process of receiving $123 billion in handouts and decided to use some of the money to have a BIG party. Public pressure was so great that when it was time to hold another junket the entire staff went incognito. According to reporters for abc15.com (KNXV) “while the company was pleading the federal government for another $40 billion dollars in loans, AIG top executives held a secret gathering at a luxury resort in Phoenix. Reporters photographed the AIG executives on hidden cameras at the Pointe Hilton Squaw Peak Resort, despite apparent efforts by the company to disguise its involvement. AIG made significant efforts to disguise the conference, making sure there were no AIG logos or signs anywhere on the property.”

Even as Chrysler cuts thousands of jobs and seeks federal aid to survive, the company still plans to pay about $30 million in retention bonuses to keep about 40 top executives. The Detroit Free Press reported that at least six Chrysler executives are due to receive bonuses of more than $1 million each to stay through August 2009. The bonus plan includes $1.89 million for manufacturing chief Frank Ewasyshyn, $1.8 million for product development chief Frank Klegon and $l.63 million for Steven Landry, executive vice-president of North American sales. Would tar and feathers be in order, or would handcuffs and jail cells be more appropriate?

You and I as US citizens and taxpayers are not even supposed to know how this money is being used. November 10th, Bloomberg News reported; “The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.”

The fox is in the chicken coop, and our Federal Reserve bankers put him there. The man who was in charge of “risk” at Bear Stearns has been hired by the Federal Reserve Bank of New York to “SUPERVISE THE FINANCIAL SAFETY AND SOUNDNESS OF U.S. BANKS.” Michael Alix is now Vice President in the bank supervision group of the New York FED. He spent 12 years working at Bear Stearns, ten of which he was head of “worldwide risk management.” He was named “chief risk officer” in 2006 and held the job when the government helped rescue the bank. This can be compared to a college football coach that never had a winning season, becoming head coach for the Green Bay Packers!

In a NewsWithViews article dated, November 9, Roger Fredinburg summed up my sentiments when he wrote: “The only bailout in the news should be stories of our politicians and their felonious friends being bailed out of jail and smuggled out of the country. As a matter of fact, I think we might consider banishing them and sending them to live on a cold frozen continent more fitting with their cruel, frigid and selfish hearts. I suggest an outdoor nudist colony in Greenland.”

© 2009 Derry Brownfield - All Rights Reserved

Web Site: www.derrybrownfield.com
E-Mail: derrybrownfield@learfield.com

Source: http://www.newswithviews.com/brownfield/brownfield171.htm

Power Players: Struggling Financial Firms Are Banking on Dodd

Power Players: Struggling Financial Firms Are Banking on Dodd

Published by Lindsay Renick Mayer on January 27, 2009 11:39 AM

Name: Sen. Chris Dodd (D-Conn.)Position: Although Dodd is chair of one of the more powerful congressional committees, he probably isn't the envy of his peers these days with an economic crisis growing larger by the day. Dodd has put in two years as chair of the Senate Committee on Banking, Housing and Urban Affairs and is now charged with shaping legislation to jump-start the economy and help floundering companies. His committee oversees the nation's financial institutions, housing and mass transit programs. Although he hasn't spent much time as chair, he's been in Congress for more than three decades.

Money Summary: Dodd has raised a total of $43.1 million since 1989 and has spent $43.2 million. His large war chest can be attributed, in part, to his presidential bid in 2008, which he abandoned after receiving less than 1 percent of the vote in the Iowa caucus that kicked off the primary season. He raised $18 million total in his attempt to win the White House. Overall, he's received 62 percent of his contributions from individuals (rather than the political action committees of unions and corporations) and is a popular Wall Street target, collecting $5.2 million from donors in New York, more than any other metro area. He's given other lawmakers and candidates 23 percent of the total $2.3 million that his leadership PAC, Chris PAC, has raised since the 2004 election cycle.

Campaigns Donors: Not surprisingly, Dodd's most generous sector is finance, insurance and real estate, which is filled with companies that are directly affected by legislation that comes out of the Banking Committee. The finance, insurance and real estate sector has given Dodd a total of $13.2 million since 1989, distantly followed by lawyers and law firms, which have given $3.7 million. The securities and investment industry, real estate industry, insurance companies, commercial banks, accountants and finance and credit companies all rank among his top 20 industry donors. In 2008, Dodd was among the top five recipients of money in the Senate from 21 industries, many of which are finance-related. He has received more money from hedge funds over time than all but two other lawmakers ($761,250), and expressed concern over a bill in 2007 that would have increased taxes on private-equity firms and hedge fund managers. Hedge funds are a big industry in Connecticut, his home state.

Dodd's most generous donors include many of the companies that have filed for bankruptcy or sought government help over the last six months: Citigroup ($428,300), Morgan Stanley ($211,300), American Insurance Group ($280,250) and Lehman Brothers ($154,300). Despite the companies' support, when the Senate was called on this month to release the second half of the $700 billion bailout money, Dodd called for stronger oversight provisions and limits on executive compensation for the companies receiving a handout.

Not all of Dodd's supporters come from Wall Street, however. Lobbyists, pharmaceutical companies and health professionals also rank among his most generous industries. During the race for the White House, the International Association of Fire Fighters (IAFF) endorsed Dodd and spent $202,300 independently to see him win. Dodd has sponsored bills to provide more funding to fire stations for equipment, training and staff.

Industry Favors: "No lawmaker has done more for firefighters in this nation than Chris Dodd," said Jeff Zack, spokesman for the IAFF. "Every time firefighters in this country say they need something, he's stood up and said 'I'm with you,' and he has not only said 'sign me on,' he's said 'let me write the bill.'

"Invests in: Compared to the rest of the Senate, Dodd is middle class. In 2007 he was worth between $629,019 and $2.1 million, ranking him 56th among all senators. At that time he had at least $100,001 invested in Blockbuster and drug makers Cardiome Pharma Corp. and Javelin Pharmaceuticals.

Other Money Matters: When mortgage buyers Freddie Mac and Fannie Mae were in dire financial straits last year and seeking help from the government, Dodd came under some fire for having received more money from the two companies' employees and political action committees than any other lawmaker over time, at $133,900. Dodd helped push through a rescue plan for the two companies last year, including better regulatory oversight in the measure.

In His Own Words: "This is not a time to be panicking about this. These are viable, strong institutions," Dodd said of Fannie Mae and Freddie Mac at a press conference in July 2008, when the federal government came to the rescue of the institutions. "These two are fundamentally, fundamentally strong. There's no reason for the kind of reaction we're getting."

Source: http://www.opensecrets.org/news/2009/01/power-players-struggling-finan.html

The Final Destruction Of The Middle Class

THE FINAL DESTRUCTION OF THE MIDDLE CLASS

By Joan Veon
September 15, 2008
NewsWithViews.com

The Graet 2008 Transfer of Wealth

Americans are confronted with what appears to be the worse economic situation since the Great Depression. What will history say about the U.S. credit crisis turned global financial crisis? At every turn investors are faced with new problems, new crises, and less than desirable solutions which include debt, deflation and a transfer of wealth.

With regard to debt, the American taxpayer has been made the lender of last resort for international bank Bear Stearns and now the two Government-sponsored Enterprises-GSEs, Fannie Mae and Freddie Mac. On top of the $29B for Bear Stearns, Fannie and Freddie’s debt of $5.4T has been effectively transferred to the balance sheet of the USA. This is equal to the entire publicly traded debt of the U.S. which is also the same as the total of America’s mortgage-related assets. In addition to personal debt, every American now has a financial responsibility for Bear Stearns and Fannie and Freddie.

We, the people, have saved the foreign investors such as China which owns $376B, Japan which owns $228B, South Korea which owns $65B, Taiwan which owns $55B, and Australia which owns $33B, from losing faith in America. It is the stockholders, both common and preferred, that have been given the raw end of the deal. While large financial institutions such as JP Morgan, which owns $1.2B of Freddie and Fannie stock, said a complete loss would only erase one or two months of profits, contrast this to smaller banks such as the Central Virginia Bank in Richmond which has $20M in shares of Freddie and Fannie. That type of loss will put them in the same kind of trouble as Lehman Brothers, not enough capitalization. There are 15 other banks that hold 10% or more of their capital in shares of Freddie and Fannie.

The Federal Accounting Standards Board is requiring more stringent standards for banks and savings and loans to maintain a certain amount of capital to protect against insolvency. Those rules are in the process of being changed to conform to international rules issued by the Bank for International Settlements in Basel, Switzerland which Congress has voted on. These rules which were only to pertain to international banks are now being applied to national banks.

Furthermore those in retirement who thought their money was safe—invested in the highest ranked bonds in the country are going to lose their dividends. Depending on the price they invested, they could have principal losses of up to 80 or 90% of their investment. Ouch.

The credit crunch began a year ago when the various investment banks both here and abroad stopped buying each others paper, a very uncommon practice between them. As a result of no liquidity for mortgage paper caused by their decision, we have the most serious slowdown in real estate in decades. The decision to not buy mortgage paper includes the sub-prime loans made to home buyers that had no down payment. To relate, I recently met a young Latino who is worried about her home. Five years ago she bought a $370,000 townhouse with $14,000 down. Her interest rate varies causing her monthly payment to jump from $2700 per month to $3500. She cleans houses for a living.

Freddie and Fannie decided they could make more money by buying subprime mortgage paper. Today there is an eleven month inventory of unsold homes. Higher interest rates as a result of the hidden clauses on floating interest rates have put many people in jeopardy of foreclosure. All of these problems have given the Federal Reserve the opportunity to seize total control of powers they did not oversee in order to protect our economy. Perhaps we should ask where the desire to put poor people into homes came from? It was part of the Bush Administration’s policy to conform to the United Nations’ Millennium Development Goals unveiled in the year 2000.

Exacerbating the credit crunch have been the historically high oil prices which have caused pain at the gas pumps and a weak dollar which has made imports more expensive. To counter high oil prices, Americans have drastically reduced how many miles they drive and a number of buying habits. In light of a tight job market and job losses in housing and the automotive industries, we are confronted with higher energy costs to heat and cool our homes, increased costs for food, and the inability to refinance mortgages. Basically the economy is now in deflation. When people stop spending, it moves from deflation to stagflation—no matter how cheap an item becomes, people can’t afford to buy. All this without knowing what the real fall out will be from the bailout of Freddie and Fannie.

The situation we are confronted with did not happen in the last few years, but began in 1913 when a group of cunningly deceitful legislators passed the Federal Reserve Act on December 24 at 11:45 p.m., after those who were opposed went home for Christmas. The entire financial system of the U.S. was transferred from Congress to a private corporation that is NOT accountable to Congress. They create and destroy the business cycle by various means: raising and lowering interest rates. The government of the United States is in bondage to a group of individuals who own the Federal Reserve. The reason why the American people cannot forgive themselves the interest on our debt is because we do not owe it to ourselves we owe it to the Federal Reserve! Every single time since then that the Federal Reserve Act was amended, over 195 times, the Federal Reserve gathered more power over various aspects of our economy. However, they are in the final throes of stripping America of any remaining vestiges of sovereignty as has been laid out in the Treasury “Blueprint for a Modernized Financial Regulatory System.”

The Blueprint was written under the watchful eye of one of America’s most successful international bankers, former Goldman Sachs CEO Hank Paulson, who is now our illustrious Treasury Secretary. Is this not a case of the fox in the chicken coup? Long time investment sage Marty Whitman commented on his actions, “Paulson thinks he is in Russia and is not giving any value to stockholders. It is outrageous that the Treasury Secretary is not giving any consideration to the shareholders.”

The Blueprint calls for key components of our financial system, not currently under Federal Reserve control, to be transferred to them. In order to do this, a number of changes will be necessary which Congress will have to approve. First, it recommends changing the banking charter to include all financial institutions, thus effectively transferring control over “national banks, federal savings associations, and federal [and state] credit union charters.” For your information, Washington Mutual is a savings and loan while Lehman Brothers is and Bear Stearns was an international bank. The Fed is to be given authority over the U.S. Payment and Settlement System thereby controlling the settlement process for securities. It will be given the role of Market Stability Regulator and it will have total control over the market. The Blueprint provides for the entire mortgage system of the U.S. to be federalized and to be under the control of the Mortgage Origination Commission. The Federal Reserve will be part of the Commission. Additionally the Federal Reserve will be given a say in the insurance industry which will be federalized and a new Office of Insurance Oversight will oversee its activities. The Federal Reserve will have a place on the Insurance Oversight commission.

By the time Congress votes on the Blueprint, there will be so many reasons for them to transfer the last vestiges of our financial sovereignty to the Federal Reserve that they will not even have to read the prepared legislation. So far, we have the bailout of Freddie and Fannie by giving Treasury a blank check to act; the Federal Reserve worked all weekend to find a buyer to Lehman, another international bank, their next project might be to rescue Washington Mutual, a savings and loan, and the Fed has been given initial powers to act as the Market Stability Regulator. The only component that is missing is the demise of an insurance company, AIG anyone?

For the record, at the heart of the Blueprint is changing our financial/banking and securities regulatory system from a national system to an international system to bring America into the world governmental system that functions above the nation-states. I have maintained that in order to get Congress to go along, we would have to have a huge problem which would allow Congress to be convinced that they need to act, however, the truth of the matter is they no longer have the power they once had because the majority has been transferred to the Federal Reserve.

History will determine how the final stage was set but I believe it started in 2000 with the Crash of the Nasdaq. Who would have ever thought that a stock would drop 90% in value? About $7T vanished from the balance sheets of investors. But we did not have to worry, as a result of 9/11, the Federal Reserve started to reduce interest rates to 45 year lows to get Americans to support the economy by buying the dream home. We bit the bait. It was the Roaring 20s all over again. At one point in the housing boom, one out of four jobs was created by the housing industry. No one asked if they could afford the debt, they only asked if they could afford the payment: a big difference. They did not ask the right questions about their mortgage because the mortgage industry was not required to disclose to them, when it should have. At one time the mortgage industry was run on honesty and integrity, but that changed too and people have been caught in a terrible snare.

The Bailout of Freddie and Fannie provide us with the latest excitement in the diabolical saga of the raping, robbing, and pillaging of America. Interestingly enough it took place 13 months after the beginning of the credit crunch. Lastly, I have maintained since the beginning of the credit crunch last August that it was planned and managed destruction in order to accomplish the final transfer of America’s financial sovereignty. All of the above only confirms my original suspicion. Sadly, only the strong will survive, only those who did not use their house as a checking account will survive, only those who turn to the Creator of the Universe, the Lord God who created heaven and earth, and His Son, Jesus, will survive in the midst of the Great 2008 Transfer of Wealth.

© 2008 Joan Veon - All Rights Reserved

Source: http://www.newswithviews.com/Veon/joan156.htm

The Fannie/Freddie Bailout: The End of the Beginning of the End

The Fannie/Freddie Bailout: The End of the Beginning of the End
By Michael E. Lewitt

Equity markets are rallying around the world this morning in the aftermath of the U.S. government's seizure of Fannie Mae and Freddie Mac. The rationale for this rally is that the government's open-ended commitment to support these two entities eliminates a huge cloud of uncertainty that was hanging over the markets. Naturally, HCM completely disagrees and believes this bailout is a sign of severe distress in the U.S. and global financial sector. While it provides short-term stability for the mortgage market, the bailout plan requires Freddie and Fannie to severely reduce their mortgage holdings in the future, removing two of the main liquidity engines from the housing market. Markets detest uncertainty, but this bailout leaves huge unanswered questions about how American home ownership will be supported in the future.

HCM still expects the Dow Jones Industrial Average to drop below 10,000 and potentially hit 9,000 before the full impact of this credit crisis is felt (i.e. most likely before mid- 2009). The Freddie/Fannie bailout is no reason to become a buyer of stocks except on a very short-term trading basis. This rally will be short-lived. Investors should use it to reduce exposure to financial stocks. Financial institutions' balance sheets are still significantly impaired. A significant part of today's buying will be related to short-covering by hedge funds that have been continually wrong-footed by the direction of the markets this year.

The seizure of Freddie and Fannie is another step on the way to unwinding the biggest credit bubble in history. The liquidation of the Mount Everest of mortgage debt, leveraged loans and other asset-backed securities that are weighing down the balance sheet of paralyzed financial institutions around the world has barely begun. While many of these institutions have reported some of their losses, that is a very different matter than selling these securities.

The markets have yet to see the rubber meet the road, so to speak, in terms of buyers and sellers agreeing on clearing prices for these hundreds of billions/trillions of dollars of securities. That is the next step that has to begin to happen for this crisis to begin to work itself out. The American model of debt-engorged free market capitalism is coming full circle and straining under its own weight. Fannie Mae and Freddie Mac were the epitome of the capitalism for-the-poor, socialism-for-the-rich policies that have been pursued by financial authorities in this country. Developed as a public-private partnership, these beasts were neither fish nor fowl.

While their equity was left in private hands and their stock-option incented management teams engaged in accounting fraud, they were able to fund themselves at below-market rates based on an implicit government guarantee of their debt. The U.S. government, particularly Congress, was fully complicit in permitting these companies and their managements to enrich themselves while abusing their unique charters. Apparently the final straw that led to the current conservatorship (translation: nationalization) was the "discovery" by the Treasury's financial advisor, Morgan Stanley, that both agencies were not marking their books properly.

The government was shocked, simply shocked to learn that these institutions were gaming the system by overstating the value of their mortgage holdings and delaying the recognition of losses and were in reality insolvent. As Christopher Wood wrote this morning, one of "the long-term consequences of the US Treasury's forced action is to lead to further decline in the moral authority of the US to lecture others on economic matters." The United States has become one big glass house, and it can no longer cast stones at others.

And indeed that is the point that HCM has been making over the past several months. The credit collapse can be laid directly at Wall Street's door. We do not say this because we like sounding churlish, but because what has occurred has real, negative long-term economic and political consequences. The cost of our unwise and corrupt policies has already been very high and it will continue to rise unless we act now to do better. Confidence in the American model of capitalism has been shaken with good reason.

Despite the rally of the dollar (mostly against the Euro, another compromised currency), the U.S. currency has been battered largely due to a loss of confidence in American economic policies and leadership. We continue to shift hundreds of billions of dollars out of our own coffers into those of countries that do not share our beliefs because we have moved too slowly to develop sound energy policies. In large part this is because our politicians remain indebted to an automobile industry that is on the verge of insolvency and to an energy industry that places its own interests ahead of the country's and the world's.

We have allowed our derivative markets - specifically those related to credit (i.e. credit default swaps) - to grow in a completely unregulated manner to the point where everybody is basically holding their breath and praying that a financial accident won't occur. This has occurred largely because it has been in Wall Street's interest to limit regulation of derivatives. But the time has come to stop allowing the fox to patrol the chicken coop. Just as it was completely foreseeable that Freddie and Fannie would fail, it is a certainty that we will face future crises if we continue to avoid difficult and unpopular choices or refuse to speak truth to power. How many wake-up calls do we need?

John F. Mauldin
johnmauldin@investorsinsight

Source: http://www.marketoracle.co.uk/Article6183.html